Business Organisations Flashcards
Define Sole Trader in terms of finance, liability, decision making, profits and dissolution
FINANCE- uses personal savings, loans and grants
LIABILITY- unlimited
DECISION-MAKING- complete control, makes all decisions
PROFITS- keeps all profits and taxed at 20-30% under self assessment income tax
DISSOLUTION- cease to exist if owner retires, dies, closes down business. There is no continuity of existence if there is nobody to take over the business.
Define Partnership
FINANCE- larger amounts of capital as each partner contributes finance. New partners bring extra finance.
LIABILITY- all partners have unlimited liability. They are collectively responsible for partnership debts.
DECISION-MAKING- shared among partners. Difference of opinion may lead to a delay in decision making.
PROFITS- shared equally or as set out in deed of partnership. Taxed under self assessment income tax.
DISSOLUTION- ends if partners agree to dissolve partnership, one partner becomes bankrupt. A new deed of partnership must be drawn up of a partner leaves.
Define Private Limited Company
FINANCE- raided by selling shares, taking out loans and receiving grants
DECISION-MAKING- shareholders appoint a board of directors and a CEO or MD. Shareholders have meetings where they make decisions. 1 share= 1 vote.
LIABILITY- limited
PROFITS- board of directors decide to dividend to be paid to shareholders based on how many shares they have. Pay corporation tax on profits.
DISSOLUTION- shares can be sold or passed on to another person on the death of shareholders. The company can be wound up by the agreement of shareholders or by court in the event of bankruptcy.
Differentiate between types of Private Limited Company
COMPANY LIMITED BY SHARES: Ltd, 1-149 shareholders, signs a constitution, limited liability, does not need to hold an AGM, can be for any commercial activity.
DESIGNATED ACTIVITY COMPANY: DAC, 1-149 shareholders, signs memorandum of association and articles of association, limited liability, must hold an AGM, can only be for a specific commercial activity
What is the Ltd document
CONSTITUTION- outlines the companies name, a statement that the company if a private limited company by shares, any other regulations the company wants to include.
DAC documents
MEMORANDUM OF ASSOCIATION- outlines the company name, the objectives of the company, the type of liability held by shareholders.
ARTICLES OF ASSOCIATION- outlines the rules and regulations for running a company. Includes procedures for organising general meetings, voting at general meetings and company closure.
How to set up a Private Limited Company
- DOCUMENT PREPARATION- directors of company prepare Form A1 and either a constitution or memo/article of association.
- SUBMISSION- documents sent to CRO with appropriate fee.
- CERTIFICATE OF INCORPORATION- CRO examines the documents and if information is correct they issues the certificate. This confirms that the business is a legal entity and can trade with other businesses.
What is a CO-OP
CO-OPERATIVE- owned and controlled by their members rather than shareholders. It runs in a democratic manner and operates for the benefit of its members. Minimum of 7 members. Register with The Registry of Friendly Societies and Revenue.
Define CO-OP under headings…
FINANCE- equity finance is issued by selling shares which are purchased by members. No incentive for members in invest more capital because 1 member= 1 vote
LIABILITY- limited
DECISION-MAKING- members own and control the co-op. The appoint a management committee to run the business.
PROFITS- shared between members as a form of dividend. Pay corporation tax.
DISSOLUTION- by agreement of court order due to bankruptcy.
Define State Owned Companies
FINANCE- supplied by the government
LIABILITY- limited
DECISION-MAKING- government ministers appoint a board of directors.
PROFITS- paid to the government as dividends or reinvested in the business.
DISSOLUTION- government can sell state enterprise, government can decide to wind up the business.
Define Public Limited Company
FINANCE- raised by selling shares on the stock exchange.
LIABILITY- limited
DECISION-MAKING- at AGM shareholders appoint a board of directors to run the business and appoint a CEO.
PROFITS- shared among shareholders as dividends. Amount of dividend is decided by directors. Pay corporation tax.
DISSOLUTION- can be dissolved because of bankruptcy or based on court order.
Define Franchise
FINANCE- franchisee invest the amount required to obtain the franchise agreement.
LIABILITY- generally take the form of private limited company so liability is limited.
DECISION MAKING- franchisee runs the business but must follow guidelines by franchisor.
PROFITS- annual fee and share of profits must be given to the franchisor.
DISSOLUTION- if the franchisee breaks any conditions in the agreement the franchisor can cancel it. Can also be dissolved mutually.
Define Strategic Alliance
FINANCE- each business invests an agreed amount of money.
LIABILITY- limited
DECISOIN MAKING- shared between all businesses.
PROFITS- shared between all businesses
DISSOLUTION- ends after the completion of an agreed project or time frame.
What is an Indigenous Firm
an Irish business that has been established and owned by Irish people or residents.
4 Benefits of Indigenous Firms to the Irish Economy
- LOYALTY- they are loyal to the local area and their employees.
- ENTREPRENEURSHIP- successful indigenous firms can encourage local people to set up their own business.
- TAX REVENUE- the firms pay tax on their profits in the form of corporation tax and PRSI.
- PROFIT DISTRIBUTION- the firms reinvest their profits in Ireland and spend money in the Irish economy.
