Chapter 2 new Flashcards
What is a soletrader
A sole trader is a business owned and run by one individual.
what is a private limited company?
A private limited company is a small to medium-sized business, often run by the family or the small group of individuals who own it.
Its shares cannot be sold without the agreement of the other shareholders and are not sold on the stock exchange e.g. Poundland , iceland
What is a public limited company ?
A public limited company is a business with limited liability.
It must have share capital of over £50,000, at least two shareholders, two directors and a qualified company secretary, and usually has a large number of shareholders.
Public and private sector organisations
Public sector organisations are those owned and run by the government.
Their main objectives will be to provide a service for the general public.
Example: NHS
Private sector organisations are those owned and run by any private individuals
These types of firms will generally set as their main objectives to maximise sales and profit.
Example: Tesco
What are non-profit organisations
Non-profit organisations: are organisations established for particular social, community, environmental, welfare or cultural aims and objectives and not for financial gain. e.g. charities
Role of shareholders
A shareholder owns a share in the organisation in which they have invested.
Shareholders purchase shares so they may receive dividends and to potentially sell the shares at a profit later on, if the company is successful and the shares increase in value.
Some investors will buy shares to gain overall control of a business,
What is a share price?
A share price is the price of a single share in a company listed on the stock exchange.
Share prices are affected by two main factors which are :
The performance of the company that has issued the shares
the external factors
What is unlimited liability
Unlimited liability: the owners of a business are liable for all the debts that the business may incur (sole trader and partnerships).
If the business incurs debts that cannot be repaid then the owner’s personal assets are at risk as there is no limit to their liability.
Disadvantages and advantages of sole trader
ADV:
easy and cheap to set up
few legal formalaties
independence
able to respond quickly to changes in circumstances
more privacy than other legal strucures
DIS:
unlimited liability
limited colaterral support applications for loans
imited capital for investment and expansion
diffcult when owner is ill or wants to go on holiday
limited skills
Disadvantages and advantages of private limited company
Limited liability
acces to more capital the uninicorporated busniess
moer privacy then plc only limted anoutnt of financial info
more flexible than plc
DIS:shares are less sattractive
less flexible if expansion needs finance
more legal formalaties
Disadvantages and advantages of public limited company
limited liability
easier to raise finance as a result of its stock exchange
greater scope for new investment
must publish a great deal of info about its performance
greater scrutiny of activities
significant administrative expenses
