Business Structure And Types Of Business Ownership Flashcards
Define the term private sector?
Made up of all organisations that are owned by private individuals and shareholders
Define the term public sector?
Made up of organisations owned and funded by the government
Name four private sector aims?
To make a profit
To increase shareholder value
Survival
Growth and gaining market share
Ethics
Name a public sector aim?
Provide goods and services to maintain and improve standard of living in the uk
To allow people to live safely and securely
To grow the uk economy
Define the term public good?
Good which are NON RIVALRY and NON EXCLUDABLE and are provided by the government eg. Streetlights
Define the term non excludable
No individual can be prevented from enjoying the benefits of the provision and no one is excluded
Define the term non rivalry
Means one person gaining from consumption of a good or service does not prevent others from also gaining the good/ service
Define the term merit good?
Merit goods are goods that if they were left solely to the private sector they would be UNDERCONSUMED
Why do we need a private sector?
To meet society’s wants
Tax payers
Job creators
Innovation
Increases GPD
more choice
Gives lower prices
Benefits from the goods in the public sector
Merit goods improve the quality of life
The private sector cannot charge people for the use of the public goods
Limitations of the public sector
Burden on the government
Don’t provide as high quality products and services as the private sector
Define the term sole trader?
A business that is owners by one person by they can employ as many people as they want
Are there any legal formalities involved when setting up for sole traders?
No
What must a sole trader do when their turnover is over £83,000
Register for a VAT
Is a sole trader an unincorporated business?
Yes
Name two advantages of becoming a sole trader?
No lengthy set up procedures, any profit made is kept by the owner
Owner is in complete control
Get to choose own hours for working
Make all decisions
Persue an interest
Define unlimited liability
Where a owner is liable for any debts that can’t be paid off and their personal possessions are at risk
State two disadvantages of becoming a sole trader?
Unlimited liability
Find it difficult to raise finance
Immense pressure
Limited range of skills available
Define the term partnership?
Where 2-20 people own a business
What is included in a deed of partnership?
How much capital each partner will contribute
How the profits and looses will be divided evenly
The procedure of ending the partnership
What are some advantages of a partnership?
Wider range of skills are available
More finance can be raised more easily
Partners can share workload
Name some disadvantages of a partnership
Unlimited liability
Decision making may be slower
Partners may disagree/ argue
Lower financial reward than sole trader as profit is shared
What is a limited company?
These are businesses that exist separately from their owners
Give two examples of limited companies?
PLC Ltd
What is separate legal existence known as
Incorporation
Are limited companies incorporated or corporates businesses
Incorporated
What is a Memorandum of Association?
It gives details of the company
What is an article of association?
This gives details on the running of the company
What does LTD stand for
Private limited company
What are three advantages of being an Ltd
Shareholders have limited liability
More capital can be raised
Control of the company can’t be lost
What are three disadvantages of a Ltd?
Legal procedure needed to set up the business
Firms are not allowed to advertise shares to the public which restricts the amount of capital that can be raised
Profits have to be shared
What does PLC stand for
Public limited company
In plc s where are shares sold and who to
Shared can be bought and sold to the public on the stock exchange
What are three advantages of becoming a PLC
Huge amount of money can be raised
Due to their size they can often dominate markets
Production costs may be low as firms may gain economies of sale
More likely to get a bank loan as they are seen as lower risk
What are three disadvantages of a Ltd?
Divorce of ownership and control
Very expensive to set up
All of the companies accounts can be inspected by members of the public
Define divorce of ownership and control
Where the owners of a business do not control the day to day decisions made in the business
What are some of the factors affecting choice of the legal structure of a business
Objectives of ownership
Finance available
Stage in business lifetime
Target market
Skills needed
Need for finance
