Business ownership Year 10 Flashcards
What is a sole trader?
A sole trader is a form of business ownership with unlimited liability where the business is owned by just 1 person.
What is a partnership?
A partnership is a form of business ownership with unlimited liability where the business is jointly owned by 2-20 people. A Deed of Partnership has been drawn up to agree the terms of the partnership.
What is unlimited liability?
Unlimited liability is when the assets of the business owners are not separate from their personal assets. If the business goes bankrupt then the personal assets can be used to pay the company debts.
What is an asset?
Something that is owned by the business, such as a computer
What is a Deed of Partnership?
An agreement that sets out the terms of a business partnership including details like how the company is shared out, voting rights in the company, how to get out of the partnership.
What is a Private Limited Company?
A private limited company (ltd) is a form of business ownership where shares have been sold privately to friends and family who become owners. The company has limited liability.
What is a Public Limited Company?
A public limited company (PLC) is a form of business ownership where shares have been sold on the London Stock Exchange to any member of the public. These owners have limited liability.
What is limited liability?
Limited liability is when the assets of the business are separated from the owner’s private assets. If the business goes bankrupt then the personal assets can not be used to pay the company debts.
What is the advantage of being a sole trader?
Advantages of being a sole trader:
- The owner has greater control at work and can make their own business decisions.
- The owner does not share the profits that the company makes.
- It is the easiest form of business to set up.
What is the disadvantage of being a sole trader?
Disadvantages of being a sole trader:
1. The owner has the responsibility of taking all of the business decisions.
2. The owner does not have any other owners to invest capital into the business.
3. Unlimited liability
Sole Traders CAN employ staff - this is not a disadvantage.
What is capital?
Capital is money invested into the business.
What is the advantage of being a partnership?
- The owner can share business decision making and so share the responsibility
- The business can benefit from more capital investment
- The partner can bring new skills into the business
What is the disadvantage of being a private limited company?
- Profits are shared between shareholders as dividends
- Business accounts have to be published giving competitors more information
- Decision making can be slower and more complicated as shareholders get a vote.
What is the disadvantage of being a partnership?
- The partners have to agree over decision making which can cause conflict and be slower.
- Profit must be shared between partners.
- Unlimited liability
What is the advantage of being a private limited company?
- More capital available from selling shares
- Limited liability
- You can control who can buy shares
What is the advantage of being a public limited company?
- Much more capital available from selling shares
2. Limited liability
What is the disadvantage of being a public limited company?
- Profits are shared between shareholders as dividends
- Business accounts have to be published giving competitors more information
- Decision making can be slower and more complicated as shareholders get a vote.
- You can not control who can buy shares
What is a dividend?
The share of the profit paid to shareholders
What is an entrepreneur?
A person who starts their own business
What are the characteristics of an entrepreneur?
Creative
Risk Taker
Determined
Confident
What is the purpose of business activity?
To satisfy the needs of customers
To identify opportunity
To develop business ideas into reality
What is the advantage of planning?
To reduce risk & help the business to succeed
Why write a business plan?
To help get finance from a bank
To identify the resources needed to start or expand a business
What goes into a business plan?
Business aims and objectives Finance: Cash flow forecast Budget for profit HR: Staffing requirements Operations: Location of the business Marketing: marketing plan
Name 5 business aims
Profit Survival Growth Provide a service Increase market share
Why might business aims differ between businesses?
Size of the businesses
Age of the businesses
Ownership of the businesses
Name 6 business stakeholders
Owners/Shareholders Employees Customers Suppliers Government Community
Which stakeholders are INTERNAL?
Owners, employees
Which stakeholders are EXTERNAL?
Customers, Suppliers, Government, Community
What 2 measures do you use to describe how a business engages its stakeholders?
Stakeholder power and stakeholder interest
If a stakeholder has low interest and low power, how should a business engage with the stakeholder?
communicate only
If a stakeholder has high interest and high power, how should a business engage with the stakeholder?
Engage directly with them and do what they ask
What power and interest does the government have in a small business?
High power, low interest so the business simply follows government instructions
A business can grow internally, name another word for internal growth.
Organic
What sort of growth describes when a business opens a new store?
Organic or internal growth
How does a business grow externally?
Merge with or take over a competitor, a supplier or a retailer
Name the 3 types of merger/takeover
Horizontal merger, vertical merger and diversification
Describe diversification
When a business takes over or merges with a business that is unrelated to what it currently does eg if Apple bought out a coffee brand
Describe vertical integration
When a business takes over or merges with a supplier or retailer eg if Apple bought out a business that made the glass for their phone screens
Describe horizontal integration
When a business takes over or merges with a direct competitor eg if Apple bought out Samsung
How does a business grow organically/internally?
Increase its output
Gain new customers
develop new products
increase its market share
