chapter 20 Business Organisations Flashcards
4 headings
formation
liability
finance
control
sole trader formation
start straight away in own name or register with CRO
CRO
Companies Registration Office
sole trader liability
unlimited
sole trader finance
limited to their savings or ability to access loans (can be difficult if theyre a new business with no history)
sole trader control
owner maintains total control and makes all decision
sole trader advs
easy/quick to set up
total decision making
keeps all profits
maintains privacy on accounts
sole trader dis
takes on all risks (personal and financial)
unlimited liability
may lack adequate capital
high work load (sole decision maker)
partnership formation
form LP1 must be completed for CRO
deed of partnership(contract) is signed
partnership liability
unlimited
partnership finance
2-20 partners can invest their savings plus loans
partnership control
decisions are shared by partners
partnership advs
risk and decisions shared
benefits from a range of experience/skills
access to more capital than sole trader
maintains privacy on accounts
partnership dis
unlimited liability
slower decision making (conflict)
partnership dissolved on death of partner
profits shared between partners
private limited company formation
must create a constitution
need to fill out form A1
CRO issues a cert of incorporation
private limited company liability
limited liability
private limited company finance
they can have up to 149 shareholders
private limited company control
1 share, 1 vote
shareholders can elect a board of directors,
bod appoints CEO who answers to the board
private limited company abbreviations
Ltd/CLS or DAC
private limited company advs
access to capital
limited liability
1 share, 1 vote
establishes a separate legal entity -bus not owners sued
continues existence upon death of a shareholder
constitution
name of company
statement stating company limited by shares
liability of shareholders are limited
rules and regulations for running the company
info available for public inspection
statutory meeting
1st meeting
constitution explained
share certs given to shareholders
vote on 1st BOD
companies act 2014
rules that companies must obey
CLS
Company Limited by Shares
DAC
Designayed Activity Company
memorandum of association
document completed setting out the relationship between the company and the general public. It includes the name of the company with Ltd after it
articles of association
document completed setting out the internal rules and regulations of the company. It describes the voting procedures for meetings
co-operative definition
members own the co-operative
common bond
business for their mutual benefit
worker/consumer/financial
co-operative formation
7+ members apply to the Registrar of Friendly Societies
co-operative liability
limited
co-operative finance
members receive a share of the profits in proportion to turnover
co-operative control
democratic structure
1 member 1 vote
co-operative adv
limited liability
members have a say in the running of the business
common bond may not be profit-driven so good deals on loans
co-operative dis
profits shared difficult to raise capital everyone has a say regardless of capital invested finances must be disclosed complicated to set up
PLC
public limited company
plc formation
7+ shareholders
sell shares to the public
plc liability
limited
plc finance
can raise capital bu selling shares to public on tock exchange
plc control
loss of control for original owners
plc
stock exchange listing can boost exposure for the brand and can help attract top staff
easier targets for takeover bids because share price impacts the value of the company and that’s out of control for owners
plc adv
limited liability
easier to raise capital
pay less tax on their profits than sole traders
attract a lot of media interest through newspapers and on TV which helps attract top employees
plc dis
complicated to form
loss of control for original owners
open to hostile takeover as shares are public
expensive to sell shares
semi-state bodies
state-owned enterprises that are technically commercially run, which benefits the Irish gvt (eg Dublin Bus, An Post, RTE, Bord Gais)
semi-state bodies adv
employment
better standard of living
develop Irish economy- IDAs and foreign investment eg Dell and Intel, employment, pay taxes
profit, gvt receives money, ESB is successful
semi-state bodies dis
might make a loss
not judged by profit- no incentive to reduce costs, tax payers money wasted
appointees are made by gvt, political reasons rather than expertise
large loans- gct cant give them money- EU comp policy
Privatisation
sale of state-owned enterprises to the private sector
the sale raises money for the gvt but they then lose control over the service
eg Aer Lingus
arguments for privatisation summarised
- gvt revenue
- reduced expenditure
- efficiency
- access to finance
- industrial relations
- competition
arguments for privatisation
gvt revenue
large sum of money
335m for Aer Lingus
arguments for privatisation
reduced expenditure
gvt won’t need to subsidise business
arguments for privatisation
efficiency
state owned are perceived as inefficient as they rely on gvt funding
arguments for privatisation
access to finance
take out loans
sell shares
arguments for privatisation
industrial relations
job security
more likely to fo on strike when in the public sector
arguments for privatisation
competition
reduce state monopoly
more competition
lower prices for consumers
arguments against privatisation summarised
- loss of state assets
- increased unemployment
- loss of control
- profit motive/increased prices
arguments against privatisation
loss of state assets
protect certain industries eg transport and water supply
arguments against privatisation increased unemployment
loss of jobs due to rationalising
arguments against privatisation
loss of control
end up with foreign investors
arguments against privatisation
profit motive/increased prices
maximise profits
increase prices for consumers
nationalisation
• when a privately rum business is taken over and run bu the state
• this happens when a business/industry cannot support itself
• the gvt deems it an essential service for citizens
• the gvt buys to save the business so that the services can be maintained
eg Angle Irish Bank in 2009
franchising
involves the granting of a license by a franchiser to a franchisee entitling the franchisee to sell the product/service
the franchiser usually has a well establishes large and successful business with a good reputation and well-established name in the market
franchise adv
• use a proven/successful business idea
• existing customer base, loyalty,
data on market
• benefit from economies of scale (advertising, raw materials)
• support/training/mentoring offered by franchisor
franchise dis
- more expensive: one-off payment of fee, the percentage of sales/profits
- restricted innovation, limited range of offerings
- restricted sales territories
- risk of damage to brand’s reputation by other franchises
evaluation of a franchisee
limitation on ability to make decisions
entrepreneurs are creative and adaptable
they get frustrated by no changes
eg can’t change the menu
indigenous business
set up and owned by irish people
main place of business is Ireland
make products in Ireland eg Staffords
importance of indigenous Firms in Ireland
1 firms have a high loyalty to Ireland
2 provide local benefits (eg purchase raw materials locally)
3 create entrepreneurial role models for young Irish residents
4 reduce our reliance on FDI (foreign direct investment)
5 increase Ireland’s export levels, if the companies sell abroad (improve balance of payments)
Indigenous firms dis
1 sell at a higher price
2 Irish marketplace is limited in size
3 if Ireland gets a rep for supporting indigenous firms it may be a disincentive for foreign investment
reasons to change organisation structure over time summarised
liability continuity expansion tax benefits expertise
reasons to change organisation structure over time
liability
move from unlimited to limited (eg sole trader to CLS)
reasons to change organisation structure over time
continuity
company ceases to exist on death of owner in sole or partnership but not in Ltd/CLS
reasons to change organisation structure over time
expansion
access to capital/ eg partnership can 2-20 investors, but Ltd/CLS can have up to 149 investors
reasons to change organisation structure over time
tax benefits
Ltd/CLS pays 12.5% tax on profits, sole traders pay the same rates as PAYE employee (20-40%)
reasons to change organisation structure over time
expertise
more owners bring more skills/ experience/ expertise, changing the structure allows this
changing trends in ownership
• privatisation of state-owned businesses
raise cash for country to pay debts
10% of Dublin Bus Routes sold to Go Ahead in 2018
• Irish businesses are MNCs
small market,member of EU, freer world trade
eg primark or kerry group
• franchises are popular
lower risk eg starbucks
• popularity in alliances
share costs, resources, ideas, and customers
Alliance
an agreement between 2+ businesses to pool resources or expertise to work together over a specified period of time or to complete a specified project, while all parties maintain their separate
eg Volkswagen and Microsoft
Alliances adv
- cost effective method
- reduces risks
- resources/expertise can be recruited
- provides access to an extended business network and market
alliances dis
- disagreement
- possible takeover
- disclosure of knowledge
- fewer alliance opportunities
transnationals
mncs
•headquarters in 1 country and branches in many others
•produces goods in more than 1 country
operates on a worldwide scale
•treats the world as a single marketplace
can move operations from country to country in response to changing market conditions
eg Coca Cola or Microsoft
transnationals adv
- tax revenue for gvt
- positive spin off effects
- direct employment
- positive impact on the BOT
transnationals
- footloose
- repatriation of profits
- pressure on gvt
- fewer alliance opportunities
