business organizations Flashcards
Sole trader Partnership Company Franchise Cooperatives
What is a sole trader?
A sole trader is an individual who owns and operates a business by themselves. They are fully responsible for the business’s debts and profits
What are the characteristics of a sole trader?
1.Single ownership and control.
2.Full responsibility for profits and losses.
3.No legal distinction between the business and the owner.
4.Unlimited liability (the owner’s personal assets are at risk).
How is a sole trader business formed?
A sole trader business is formed by the individual registering the business with the relevant authorities. There are usually no formal registration requirements unless the business reaches a certain size or is subject to specific regulations (like taxes or health and safety).
What are the advantages of a sole trader?
1.Full control and decision-making power.
2.Easy and inexpensive to set up.
3.All profits belong to the owner.
4.Simple tax filing and minimal regulatory requirements.
What are the disadvantages of a sole trader?
1.Unlimited liability means personal assets are at risk.
2.Limited ability to raise capital.
3.High workload and 4.responsibility for all aspects of the business.
5.Limited expertise and skill range compared to larger businesses.
What is a partnership?
A partnership is a business structure where two or more people share ownership and the responsibilities of running a business. Profits and liabilities are shared according to the partnership agreement.
What are the characteristics of a partnership?
1.Shared ownership and responsibility.
2.Partners share profits and losses.
3.Decision-making is typically collaborative.
4.Unlimited liability (in general partnerships).
How is a partnership formed?
A partnership is formed through an agreement between two or more individuals. This agreement should outline profit sharing, roles, and responsibilities, and it must be registered with relevant authorities.
What are the advantages of a partnership?
1.shared responsibilities and work.
2.Pooled resources (capital, skills, and expertise).
3.Easier to raise capital than a sole trader.
4.Flexibility in management and decision-making.
What are the disadvantages of a partnership?
1.Unlimited liability for business debts.
2.Potential for conflict between partners.
3.Profits must be shared.
4.Difficult to transfer ownership without partner approval.
What is a company?
A company is a separate legal entity from its owners (shareholders). It can own property, enter contracts, and is responsible for its own debts. Companies can be private or public.
What are the characteristics of a company?
1.Separate legal identity from its owners.
2.Limited liability for shareholders.
3.Ownership is divided into shares.
4.Can raise capital through share issuance.
How is a company formed?
: A company is formed by registering with the relevant governmental authority, such as a company registrar. This includes submitting articles of incorporation, bylaws, and paying registration fees.
What are the advantages of a company?
1.Limited liability for shareholders.
2.Easier to raise capital through share issuance.
3.Perpetual existence (the company continues regardless of ownership changes).
4.Can attract investors and expand more easily.
What are the disadvantages of a company?
:
1.More complex and expensive to set up and run.
2.Subject to stringent legal and regulatory requirements.
3.Profits may be taxed at both the corporate and personal levels.
4.Less control for individual owners due to multiple shareholders.
What is a franchise?
A franchise is a business model in which a franchisee purchases the rights to operate a business using the brand, business model, and systems of an established company (franchisor).
What are the characteristics of a franchise?
:
1.Franchisee operates under the franchisor’s brand and systems.
2.Franchisee pays ongoing fees or royalties to the franchisor.
3.The franchisor provides support and training.
The franchisee often follows 4.specific operational guidelines and standards.
How is a franchise formed?
: A franchise is formed when an individual (franchisee) enters into a contract with a franchisor. This agreement grants the franchisee the rights to use the franchisor’s brand and business model.
What are the advantages of a franchise?
1.Proven business model with brand recognition.
2.Ongoing support and training from the franchisor.
3.Easier to secure financing due to the brand’s reputation.
4.Lower risk compared to starting a new business.
What are the disadvantages of a franchise?
1.High initial cost and ongoing royalty payments.
2.Limited control over business decisions and operations.
3.Risk of the franchisor’s brand or reputation declining.
4.Restricted in terms of innovation or changes to the business model.
What is a cooperative?
A: A cooperative is a business owned and operated by a group of people who share a common interest. The members have equal voting rights and share in the business’s profits.
What are the characteristics of a cooperative?
1.Member-owned and controlled.
2.Profits are distributed among members based on their participation.
3.Focus on meeting members’ needs rather than maximizing profit.
4.Each member has an equal say in decision-making.
How is a cooperative formed?
:
A cooperative is formed when a group of individuals with a shared interest come together to create a business that meets their needs. Legal formation usually involves registering the cooperative with the relevant authorities and creating a membership agreement.
