Ch-2: Types of business organisations Flashcards
Define:
Limited Liability
The liability of owners are limited to the amount they invested. Business is a seperated legal unit
Define:
Unlimited liability
The liability of owners are not limited to the money invsted. Owners can be held responsible for the debts of businesses
Define:
Sole traders
Business operated and owned by just one person. The owner is called proprietor
What are the advantages of sole trader
- Easy to set up
- He/She is his/her own boss
What are the disadvantages of sole trader
- Unlimited liability
Define:
Partnership
Partnership is a form of business where two or more people agree to jointly own a business
Define:
Partnership agreement
Partnership agreement is a written, legal agreement/contract formed between partners
What is the max number of partners?
20
If one partner dies what happens?
If one partner dies, the whole business is destroyed
What are the advantages of partnership
- More capital
- Responsibilities are shared
What are the disadvantages of partnership
- Unlimited liability
Define:
Limited partnership
These businesses are partnerships that offer partners limited liability but shares can’t be bought or sold
Define:
Dividends
Payment made to the shareholders from the profit made by the company
What are the 2 types of ltd companies?
- Private
- Public
Define:
Private ltd company
Incorporated businesses where owners have seperate legal identities. They can make contracts. Shares are not sold to public
What are the advantages of private ltd company?
- Capital raised by selling shares
What are the disadvantages of private ltd companies?
- Legal formalities
- Accounts are public
Define:
Public ltd company
Incorporated business where shareholders sell shares to the public. These are suitable for large business
Define:
what are incorporated and unincorporated business
Incorporated business are limited liability and unincorporatd business are unlimited liability
What are the advantages of public ltd companies?
- Shares sold to public, tradeable in stock exchange
What are the disadvantages of public ltd companies?
- legal formalities
- Accounts are public
Define:
Joint ventures
When two or more businesses start a new project together sharing risks, capital and profits
Define:
Franchise
Business based upon the use of brand names, promotional logos, and trading methods of existing business
Differentiate Franchisor and Franchise
Franchisor (ex: burger king) sells license to operate the business to Franchise (One starting the business using the name of the franchisor)(like opening a branch of the brand at a different location)
