Ch.4-Types of Business Organisation Flashcards
Sole trader
A business that is owned and controlled by just one person who takes all of the risks and receives all of the profits.
Start-up capital
The finance needed when first setting up a business
Partnership
A business formed by 2 or more people who will usually share responsibility for the day-to-day running of the business. Partners usually invest capital in the business and will share profits.
Unincorporated business
A business that doesn’t have a legal identity separate from its owners. The owners have unlimited liability for business debts.
Unlimited liability
If an unincorporated business fails, then the owners might have to use their personal wealth to finance any business debts.
Shareholder
A person or organisation who owns shares in a limited company.
Private limited company
Often a small to medium-sized company; owned by shareholders who have limited liability. The company cannot sell its shares to the general public.
Public limited company
Often a large company; owned by shareholders who have limited liability. The company can sell its shares to the general public.
Ordinary shareholders
The owners of a limited company.
Limited liability
The shareholders in a failed limited liability company only risk losing the amount that they have invested in the company, and not their personal wealth.
Dividend
A payment, out of profits, to shareholders as a reward for their investment.
Collateral
Non-current assets offered as security against borrowing.
Franchise
A business system where entrepreneurs buy the right to use the name, logo and product of an existing business.
Joint venture
Two or more businesses agree to work together on a project and set up a separate business for this purpose.
Public corporation
A business organisation that is owned and controlled by the state.
