Chapter 2: Business structure Flashcards
Private limited company
A business owned by shareholders, often members of the same family. Cannot sell shares outside the business.
Initial Public Offering (IPO)
An offer to the public to buy a company’s shares
Public limited company
A company whose shares are sold to the public on a stock exchange
Primary sector business
A business that deals with the extraction of raw materials
Secondary sector business
A business that turns raw materials into finished goods
Tertiary sector business
A business that is based in the service industry
Quaternary sector business
A business that provides information services such as web design
Benefits of industrialisation
- GDP increases
- High output of goods can result in more exports than imports
- More jobs from expanding businesses
- More tax by expanding businesses
- Value is added to a country’s exports1.
Problems of industrialisation
- The movement of people into towns causes housing problems
- Import of raw materials increases import costs
- More multinational companies means more competition
Consequences of deindustrialisation
- job losses in the primary sector
- Movement of people away from cities
- job opportunities in the service sector
- increased need for retraining programs
Public sector
Organisations owned and controlled by the government
Private sector
Organisations owned and controlled by individuals
Mixed economy
Economic resources are owned by bot public and private sectors
Free-market economy
Resources are largely owned by the private sector
Command economy
Resources are controlled by the public sector
Public corporation
A business owned and controlled by the state
Sole trader
A business owned by one person who has full control of the business and provides permanent finance.
Unlimited liability
Business owners have full legal responsibility for the debts of a business
Partnership
A business formed by two or more people who share responsibilities and capital investment.
Limited liability
The only liability a shareholder has if the business fails is the amount they have invested
Share
A certificate confirming part-ownership of a business and entitlement of dividends to the shareholder
Shareholder
An individual or group that owns shares in a limited company
Memorandum of association
Document stating the name of the company, address of the head office, maximum share capital and declared aims.
Articles of association
Document covering the internal workings of the business, name of directors an procedures to follow during meetings
Cooperative
A jointly owned business operated by members for their mutual benefit, to distribute goods or services
Franchise
The legal right to use the name, logo and trading systems of an existing successful business
Franchisee
A person or business that buys the right from a franchiser to run the franchise
Franchiser
A person or business that sells the right to open stores and sell products/services using the brand name and identity.
Joint venture
Two or more companies agree to work on a project together and create a different business division to do so
Social enterprise
A business with mainly social objectives that re-invests most of its profits into benefiting society.
What are the advantages of a Private limited company
Shareholders have limited liability
Continuity
The business has a separate legal identity
What are the disadvantages of a Private limited company
Not easy to raise finance through the sale of shares
Legal formalities involved such as the memorandum of association and the article of association.
The company would have to send its end of year accounts to the government.
What are the advantages of a Public limited company?
Easy to raise finance through the sales of shares
Owners have limited liability
Continuity
What are the disadvantages of a Public limited company?
Shares are subject to fluctuation
There is a high risk of a takeover from another business.
