Business Organisations Flashcards
types
sole trader partnership private limited company public limited company co-op state owned enterprise franchise alliance transnational company indigenous firm
sole trader
individual who sets up, owns, manages their own business
do not have limited liability
advantages of sole trader
easy to set up
keep all profits
accounts do not have to be published
make all decisions
disadvantages of sole trader
unlimited liability - if business goes bankrupt, personally responsible, may have to forfeit personal belongings lack of capital lack of skills not a separate legal entity no continuity of existence
partnership
set up, owned and managed between 2-20 owners
combine resources and talents to make profit
deed of partnership
how profits are shared what each partner is expected to do what salaries each is to be paid rules for admitting new partners and voting rights what happens if closes down
advantages of partnerships
easy to set up
more capital
more skills and expertise
confidential - accounts do not have to be published
disadvantages of partnerships
unlimited liability - jointly and severally liable, may have to individually forfeit personal possessions slow decision making profit sharing not separate legal entity no continuity of existence
private limited company
owned by 1-149 owners
limited liability
name must end in ltd, cannot sell shares to general public
eg eason and son ltd
advantages of ltd
limited liability more capital workload is shared less tax separate legal entity
disadvantages of ltd
complicated to set up - must apply for permission, pay fee to registrar of companies, receive cert of incorporation
lack of confidentiality
legal requirements
profits shared
articles of association
internal rules and regulations of company contains: -share capital breakdown -voting rights attached to each share -procedure for calling meeting
limited liability
form of legal protection that benefits the shareholders in a company
in event of bankruptcy, a shareholder can only lose a maximum of what they invested
ie lose value of their shares but not private assets
memorandum of association
this document governs a company’s relationship with the general public
contains the name, objectives, share capital details and details of directors
public limited company
set up by at least 7 shareholders with no upper limit
run by board of directors who are elected at AGM
limited liability, PLC
raise capital by selling shares to public
eg Bank of Ireland PLC
advantages of PLC
limited liability more capital less tax high profile - attract media interest, free publicity, attract top employees separate legal entity
disadvantages of PLC
very complicated to set up - cert of incorporation, trading cert
lack of confidentiality
legal requirements
possible takeover
shareholders
owners
invest their money
receive share of company’s profit - dividend
vote at AGM for board of directors
board of directors
voted by shareholders to run business make all major decisions set goals and devise strategies report to shareholders at AGM decide dividend they will receive
manager director
run company day to day elected by BOD
make sure objectives are achieved
sets out vision, motivate employees
hires senior management + delegates duties
auditor
account that must be hired by law to check to ensure accuracy of accounts
totally independent of company
writes report on accounts if fair and accurate
co-operative
set up by a group (min 7) who come together and establish an enterprise with the aim of helping one another
run by a committee of management voted in by members
limited liability
application made to registrar of friendly societies, then cert of registration
credit union (co-op)
group of people with common bond/interest
save together and lend to another at reasonable level of interest
common bond may be their trade union, area, employer
members borrow for variety of purposes, calculated on the outstanding balance
advantages of co-op
limited liability democratic incentive/motivation separate legal entity continuity of existence
disadvantages of co-op
complicated to set up
lack of confidentiality
legal requirements
difficult to raise capital - less incentive to contribute
state owned enterprise
businesses owned by irish government on behalf of the people of ireland
run by professional managers
eg RTE, An Post
advantages of state owned enterprise
employment
essential services provided
develop irish economy - IDA Ireland
dividends used to improve services, pay national debt
disadvantages state owned enterprise
many make a loss and receive subsidy to cover costs
less incentive to keep costs low
large loans to repay
privatisation
government sells its state owned enterprises and lets private entrepreneurs run them instead
can offer its shares for sale to the general public or to one business
eg Aer Lingus
advantages of privatisation
cash from sale
free from political decision making ie more profitable decision making
allows company to raise money for development and expansion
offer opportunity to make a decent return
disadvantages privatisation
higher prices, poorer service, redundancies
gov lose its annual dividend
only profitable are privatised
make decisions for good of company not country
franchises
business arrangement whereby the franchiser sells the right to use his/her name, idea or business to others and allows them to set up an exact replica of the business
pay large one off fee for permission
must obey certain conditions
eg McDonalds
advantages of franchises
reduced risk
economies of scale
training and on-going support
advertising
disadvantages of franchises
cost
restrictions
damage to image
alliance
business relationship where two business agree to co-operate with each other on a single business project
remain separate legal entities
benefit from sharing costs, expertise, resources
eg Mercedes and Swatch make smart car
advantages of alliances
cost effective expansion
more successful expansion
new markets
control
disadvantages of alliances
disagreements
lose customers
transnational companies
company with a head office in one country and branches, business operations or factories in a number of other countries IDA attract based on: -low corp tax -access to grants -access to EU markets -skilled workforce -english language
advantages of transnational companies
employment new technology competition tax spin off effect exports
disadvantages of transnational companies
closures
repatriation of profits
political pressure
conflict of interest
indigenous firms
businesses set up, owned and managed by irish people
main place of business is ireland
will sell their products at home and possibly export
mostly small and medium sized
eg Lily O’Briens, Supermacs
advantages of indigenous firms
employment
loyalty
enterprise culture
profits
changing trends in ownership and structure
co-ops becoming PLCs privatisation increasing popularity of franchises nationalisation eg AIB during recession alliances eg bord gais and tesco
why businesses change their organisational structure over time
to raise capital to lower risk faced by owners increase sales and profit acquire skills continuity of existence
