Business Section 1 Flashcards
Diffrent types of business activity?
Primary activity - Extraction of natural resources / raw materials.
Secondary activity - Manufacturing of materials.
Tertiary activity - Providing a service (selling and distribution)
Different sectors of operation?
Private sector - Business owned by profit making people/shareholders.
Public sector - Business owned by government and funded by tax payer.
Third sector - Business not aiming to make profit. Charities etc.
What is a sole trader?
A sole trader is a person who is the exclusive owner of a business entitled to keep all profits after tax has been paid but liable for all losses.
What is a partnership?
A partnership is a legal form of business operation between two or more individuals who share management and profits.
What is a deed of partnership?
A deed of partnership is a document containing an agreement that details the rights and obligations of each partner participating in a document.
What is a franchise?
A franchise is a marketing arrangement allowing another business to trade in the same style as an existing business.
What is a royalty fee?
A royalty fee is the up front fee for the right to use the businesses name.
What is Private limited company (LTD)
A private limited company is a business owned by one or more shareholders who have brought shares privately.
What is a public limited company (PLC) ?
A public limited company is a business owned by two or more shareholders who have brought shares on the stock exchange.
What is a state owned organisation?
A business owned by the state and controlled by the government.
What is a register charity?
A business with charitable aims and status.
What is a community interest companies ?
A company set up by private individuals to benefit society, rather then to make a profit.
Private limited company (Ltd)
Positives?
Negatives?
Positives:
- Raise finds by selling shares.
- Continuity ur a shareholder dies.
- Control of who shares are sold to.
- Limited Liability.
- Shareholders closely involved.
- Range of skills and expertise.
- Separate legal identity.
Negatives:
~ Financial accounts not kept private.
~Dividends need to be payed to shareholders.
~Complex legal requirements.
Public limited company (PLC)
Positives ?
Negatives ?
Positives:
- continuity if a shareholder dies.
- limited liability.
- Can raises large amounts of capital through stock market.
- Larger range of skills and expertise due to larger level of shareholders and involvement.
Negatives:
~ Expensive and time consuming to set up.
~ Cannot control who shares are sold to.
~ Original owners loose some control when shares are brought. Stand a risk of being taken over.
~ Very complex legal requirements.
~ Dividends to be paid to shareholders.
~ Financial accounts must be published.
~ Owners play no part in general running of business.
State owned organisation
Positives ?
Negatives ?
Positives:
- Not driven by need to earn profit.
- Public provision.
- Provide services most business would not.
- Availability of funds such as taxes.
- Limited Liability.
- Wide range of expertise.
- Business continuity
- No shareholders to please.
Negatives:
~ Slow to change and slow decision making.
~ Inflexible procedures.
~ Bureaucratic.
Different sectors of operation?
Private sector - Business owned by profit making people/shareholders.
Public sector - Business owned by government and funded by tax payer.
Third sector - Business not aiming to make profit. Charities etc.
What is a sole trader?
A sole trader is a person who is the exclusive owner of a business entitled to keep all profits after tax has been paid but liable for all losses.
What is a partnership?
A partnership is a legal form of business operation between two or more individuals who share management and profits.
What is a deed of partnership?
A deed of partnership is a document containing an agreement that details the rights and obligations of each partner participating in a document.
What is a franchise?
A franchise is a marketing arrangement allowing another business to trade in the same style as an existing business.
What is a royalty fee?
A royalty fee is the up front fee for the right to use the businesses name.
What is Private limited company (LTD)
A private limited company is a business owned by one or more shareholders who have brought shares privately.
What is a public limited company (PLC) ?
A public limited company is a business owned by two or more shareholders who have brought shares on the stock exchange.
What is a state owned organisation?
A business owned by the state and controlled by the government.
What is a register charity?
A business with charitable aims and status.
What are community interest companies ?
A company set up by private individuals to benefit society, rather then to make a profit.
Private limited company (Ltd)
Positives?
Negatives?
Positives:
- Raise finds by selling shares.
- Continuity ur a shareholder dies.
- Control of who shares are sold to.
- Limited Liability.
- Shareholders closely involved.
- Range of skills and expertise.
- Separate legal identity.
Negatives:
~ Financial accounts not kept private.
~Dividends need to be payed to shareholders.
~Complex legal requirements.
Public limited company (PLC)
Positives ?
Negatives ?
Positives:
- continuity if a shareholder dies.
- limited liability.
- Can raises large amounts of capital through stock market.
- Larger range of skills and expertise due to larger level of shareholders and involvement.
Negatives:
~ Expensive and time consuming to set up.
~ Cannot control who shares are sold to.
~ Original owners loose some control when shares are brought. Stand a risk of being taken over.
~ Very complex legal requirements.
~ Dividends to be paid to shareholders.
~ Financial accounts must be published.
~ Owners play no part in general running of business.
State owned organisation
Positives ?
Negatives ?
Positives:
- Not driven by need to earn profit.
- Public provision.
- Provide services most business would not.
- Availability of funds such as taxes.
- Limited Liability.
- Wide range of expertise.
- Business continuity
- No shareholders to please.
Negatives:
~ Slow to change and slow decision making.
~ Inflexible procedures.
~ Bureaucratic.
Registered charity / not for profit
Positives ?
Negatives ?
Positives:
- All profits and services go to charity.
- Limited liability
- Wide range of funds available
- direct control of business aims
- Business continuity
- Separate legal entity
- Tax advantages / exemption
Disadvantages:
~ Relies on volunteers ~ Financial accounts not private ~ Strict charitable status test ~ Bureaucratic rules and regulations ~ Very complex legal requirements
Community interest companies (CIC)
Positives?
Negatives ?
Positives:
- No dividends to pay
- Wide range of funds available
- Business continuity
- Separate legal entity
- Resources can only be used for public benefit
- Any profit made is reinvested into business
- Limited liability
Negatives:
~ Complex legal requirements
~ Financial accounts not private
~ Must pat tax on income
Legal status
- The legal status of a business is whether …
- A business with a separate legal entity can …
- Which of the following forms of legal business ownerships do not have a separate legal entity and which do have a separate legal entity.
- Sole trader
- Partnership
- Private limited company (Ltd)
- Public limited company (Plc)
- State/government owned organisation
- Registered charity
- Community interest companies (CIC)
- The legal status of a business is whether the business is a separate entity from its owners or not.
- A business with a separate legal entity can sue and be sued in its own right.
(This means shareholders and other people involved in the business cannot personally sue or be sued due to a problem in the business it’s self) - Sole trader - Does not have separate legal entity.
- Partnership - Does not have separate legal entity.
- Private limited company (Ltd) - Has separate legal
- Public limited company (Plc) - Has separate legal
- State/government owned organisation - Has separate legal
- Registered charity - Has separate legal
- Community interest companies (CIC) - Has separate legal
Liability
- A business which has unlimited liability puts at …
- Which of the different forms of legal business ownership have unlimited liability and which have limited liability.
- Sole trader
- Partnership
- Private limited company (Ltd)
- Public limited company (Plc)
- State/government owned organisation
- Registered charity
- Community interest companies (CIC)
- A business which has unlimited liability puts at risk the personal possessions of the owners if the business gets into financial difficulty.
- Sole trader - Unlimited liability
- Partnership - Unlimited liability
- Private limited company (Ltd) - Limited liability
- Public limited company (Plc) - Limited liability
- State/government owned organisation - Limited liability
- Registered charity - Limited liability
- Community interest companies (CIC) - Limited Liability
Funding
Business need to consider how much finance they need and the finance options available.
- What a finance possibility for a public sector organisation?
- What’s a finance possibility for a third sector organisation?
- What’s a finance possibility for a private sector organisation?
- A public sector organisation may be financed from taxation.
- A third sector organisation may receive grants and donations.
- A private sector organisation is more likely to secure funds by borrowing or by taking on additional owners (shareholders).
Control/decision making
The form of ownership will affect the control and decision making in a business.
This includes whether it is the owner or someone else who makes the business decisions.
How can complex form of ownership affect business decision making?
- Increase time it takes for decisions to be made.
Decision uncertainty and disagreement can happen when their is complex ownership and control problems.
The decision made could be unfitted to the task at hand.
Legal / administrative requirements
Different forms of legal business ownership require different levels of legal / administrative requirements. These requirements are time consuming and likely to be costly due to complexity.
Which of the different forms of legal business ownership have complex legal / administrative requirements and which don’t.
- Sole trader
- Partnership
- Private limited company (Ltd)
- Public limited company (Plc)
- state/government owned organisation
- charities
- community interest companies
1.
Sole trader - Simple legal / administrative requirements.
Partnership - Simple legal / administrative requirements.
Private limited company (Ltd) - complex legal / administrative requirements.
Public limited company (Plc) - very complex legal / administrative requirements.
state/government owned organisation - have to follow general legal / administrative requirements
charities - very complex legal / administrative requirements.
community interest companies - complex legal / administrative requirements.
Memorandum of association
- Definition?
- What forms of business ownership have to complete a memorandum of association when starting?
- Memorandum of association is a document which states what the company has been formed to do.
- Private limited company (Ltd)
- Public limited company (Plc)
- Community interest companies
- Registered charities
Articles of association
- Definition?
- Which forms of legal business ownership must complete an articles of association in order to start?
- Articles of association is a document which governs the internal rules of how the company is to be run.
2. Private limited company Public limited company Community interest companies Registered charities
Form 10
- Definition?
- Which forms of legal business ownership have to complete form 10 in order to start?
- Form 10 is a form declaring director names, the name of the company secretary and the businesses registered office.
2. Private limited company (Ltd) Public limited company (Plc) community interest companies (CIC) Registered charities
Form 12
- Definition?
- Which forms of legal business ownership must complete and comply with form 12 in order to start the business?
- Form 12 is a statutory declaration that all requirements of the company registration process have been complied with.
2. Private limited company (Ltd) Public limited company (Plc) Community interest companies (CIC) Registered charities
Business aims and objectives
1. Survival
⬇️
2. Being enterprising
⬇️
3. Growth
A business has Financial aims and wants to build their Reputation throughout their time as a business.
- Flip card -
What are the main aims and objectives of a business from start to finish?
Survival
Survival is Initial aim as a new business is unlikely to make a profit.
- At the begging the business wants to survive in its market whilst increasing their …
- At the begging the business wants to survive in its market whilst increasing their sales and customer base.
Being enterprising
- What is enterprising in business?
- This is important to a business and is when a business is owned by a person with entrepreneurial spirit which means the person has new ideas and is initiative and will undertake task of importance and difficulty.
Business growth
Most business owner will want their business to grow for many reasons such as increased profit or future financial security.
- What are some forms of business growth?
- Physical growth such as opening a second branch of a shop, extending a factory or employing more staff.
- Business growth through Increasing its market share by securing more sales.
- Extending range of products.
Financial aims
Financial aims of a business vary between different types of forms of businesses. They include:
- Break even
- Increase revenue
- Reduce costs
- To make / increase profit
- What are the means of each financial aim?
1.
Break-even is where a business aims to cover it costs to allow the business to survive in its market.
Increase revenue is to increase amount of money brought in by sales.
To reduce costs is to aim to lower expenses involved in running the business such as reducing costs of raw materials/goods.
The aim to make/increase profit is where a business has covered its costs and additional revenue leads to profit.
Reputation
Most business aim to build a certain reputation such as high quality.
- Why is a good reputation important?
- What can a good reputation lead to?
- Customers are more likely to trust and use a business with a good reputation. The business will also have high social exemption and want with a good reputation such as Gucci.
- Help business survival and increase revenue and profits due to likely increase of customer base or being able to sell products for higher values.
