Business Structure Flashcards
What are the two business sectors
Public
Private
What is a private sector business
Business activity owned financed and controlled by private individuals/ individuals
What is a public sector business
Business activity owned and controlled by the state, through governments.
What are the business legal structures
sole trader, partnerships, private limited companies, Public limited companies, Cooperatives and charities and social enterprise
What is a sole trader
You’re self-employed if you run your own business as an individual and work for yourself, may employ staff.
What is a partnership
Owned and ran between 2-20 people
What is a private limited company (LTD)
Often a small business, only sells shares to friends and family and has limited liability and gives the owners limited liability
What is the difference between limited liability and unlimited liability
Limited: Your business will become a separate legal entity. If business goes in debt owners don’t lose personal belongings to pay debt.
Unlimited: IF business goes into debt owners will have to pay the debt with there personal assets.
What is a public limited company (PLC)
Usually large, well-known business, shares sold publicly on the stock exchange.
What is a social enterprise
Include for profit and non-profit businesses and trade for social and environmental purposes, nor public or private sector
What is a charity
A non-profit organisation established with the aim of collecting money from consumers and giving to a certain cause.
What are the aims of private sectors
Survival - To make sure business survives mainly the first couple of years
Share price - To make sure the share price is highest so more investors invest and business grows.
Market power - Business’ want more market power as this gives the ability to business’ to influence the terms on which goods are bought and sold.
Sales and revenue - Business’ want more sales and revenue to grow and expand the business also to keep it alive.
Efficiency - Business’ want to be efficient as this cuts costs as the firm will waste fewer resources, also being more efficient will increase the amount of work completed, Investments yield high returns allowing a business to grow and earn more revenue.
Environment - The business may want to help the environment as it may make the business have a positive reputation
Profit maximisation- A business want to maximise on profits as this will maximise growth and the business will be able to invest more back into the business
What are the aims of public sectors
Access to everyone - Regardless of income, location and income
High quality - People feel comfortable and happy to return
Affordability - Services offered at prices way cheaper or free compared to private sector prices
What are the factors of choice of structure
Limited liability - If business goes in debt owners don’t lose personal belongings to pay debt, owners aren’t going all in
Size - If a business is small, they may pick to be a structure which suits their numbers of employees small - sole trader or partnership.
Need for finance - Many structures are able to gain help against debt e.g be a certain structure to be able to gain a loan etc.
Age - The age of the owner can affect the choice of structure as if they are old they want to pass the business on to a family member or if the owner is young they may want to start off small.
Nature of business - Depends what the business is doing.
Degree of control - Owners may want more control of the business or less or all of the control (sole trader)
What are the sources of finance
Retained profits
Bank Loan
Overdraft
Sale of unwanted assets
Leasing
Government grants
