Business structure Flashcards
What are the different structures of businesses
Sole traders, Private and public limited companies, public and private sector organisations and non profits
Define the private sector
The sector of the economy that is owned and controlled by individuals or groups of individuals rather than the government
Which business structures fit into the private sector
Sole traders, private limited companies and public limited companies
Define the public sector
The sector of the economy that is owned and controlled by the government rather individuals or groups of individuals
Which three business structures fit into the public sector
State education, national health service and services like the police and army
What are the three business objectives
Profit, growth and survival
What are the objectives of the public sector
Provide services to society that are essential, would not be provided by the private sector and can not be easily charged for or sold profitably but benefit society like street lighting
What is a sole trader
An individual who owns and runs their own business, they are legally required to keep a record of their income and expenses and must file their taxes
What liability does a sole trader have
Unlimited liability
What are the benefits to becoming a sole trader
Cheap and easy to set up, all profits go to you, autonomy in decision making, financial records stay private, motivation is high (business and person are the same)
What are the disadvantages of becoming a sole trader
Unlimited liability, limited capital for investment, little specialist skills, difficult to find cover when ill
What is a partnership
Where two or more people share the costs, risks and responsibilities of being in business together
What are sleeping partners
Partners who invest in but do not manage the business
What are the benefits of partnerships
Risks, costs and responsibility is shared, more scope for specialist skills, simple and flexible, financial records remain private, more capital can be raised
What are the disadvantages of partnerships
Unlimited liability, arguments in decision making, if a partner dies, resigns or goes bankrupt the partnership is dissolved, trust is crucial
What are limited companies
The owners and the company are separate legal identities so finances are kept separate, the owners are shareholders who have limited liability and are not responsible for debts, they can only loose their shares
Describe incorporation
Companies send off various forms including a memorandum of association, articles of association, form 10 and form 12
What are the features of private limited companies
Have Ltd. after their name, owned by shareholders but only family and friends, can only sell shares to shareholders (not on the stock exchange)
What are the features of public limited companies
Have Plc. after their name, shares can be sold to the public via a stock exchange, open to public scrutiny and risk of hostile takeovers
What are the advantages of Private limited companies
Limited liability, separate legal identity, more flexible than a PLC, financial records are relatively private, capital raised through selling shares
What are the disadvantages of Private limited companies
More complex to set up due to increased legal requirements, some loss of control, unable to sell shares to the public
What are the advantages of Public limited companies
Limited liability, separate legal identity, perceived status, more capital through selling shares
What are the disadvantages of Public limited companies
Lack of privacy because financial record are open to the public, harder to set up due to legal requirements and ongoing admin costs, loss of control and risk of hostile takeovers
What are the factors affecting the choice of legal structure
Ability and need to raise finance, nature of the business, personal preference, type of liability and size of the business
What is a social enterprise
A business with primary social objectives whose surpluses are principally reinvested for that purpose in the business or community, rather than being driven by the need to maximise profit for shareholders and owners
What are charities
Organisations with an aim to support a specific cause or benefit for the well being of society, organisations have to register to gain charitable status and are treated differently in terms of taxes
What are societies
Organisations, formal or informal, made up of groups of people with a common interest
What are cooperatives
Organisations that operate for the wellbeing of their members, members can be customers, employees or suppliers/producers
