chapter 4 - types of business organisation Flashcards
definition of:
incorporated business
examples?
-companies that have separate legal identities from owners and have limited liabilities
- private limited company
- public limited company
definition of:
unincorporated business
examples?
-companies that don’t have separate legal identities from their owners and have unlimited liabilities
- sole trader
- partnership
definition of:
sole trader
a business owned by one person
definition of:
partnership
a form of business in which two or more people agree to jointly own a business
definition of:
public limited company
a business owned by shareholders but they cannot sell shares to the public
definition of:
public limited company
a business owned by shareholders but they can sell shares to the public and their shares are tradeable on the stock exchange
definition of:
franchise
a business based upon the use of the brand names, promotional logos and trading methods of an existing successful business
definition of:
joint venture
where two or more businesses start a new project together, sharing capital, risks and profit
definition of:
dividends
payments made to shareholders from profits (after tax) of a company
definition of:
annual general meeting
a legal requirement for all companies where shareholders may attend and vote who they want to be on the board of directors of the coming year
definition of:
shareholders
the owners of a limited company who buy shares which represent part-ownership of the company
definition of:
limited liability
the liability of shareholders in a company is limited to only the amount they invested
definition of:
unlimited liability
owners of business can be held responsible for the debts of business they own
advantages and disadvantages of private limited company?
advantages:
- increase capital from sales of shares
- continuity
- limited liability, separate legal identity
disadvantages:
- cannot sell to public
- not easy to transfer shares
advantages and disadvantages of public limited company?
advantages:
- can sell to anyone
- rapid expansion possible
- continuity
- limited liability, separate identity
disadvantages:
- complex legal formalities (time consuming)
- disclosure of accounts (more regulations and controls to protect interests of shareholders)
advantages and disadvantages of sole trader
advantages
- one man control
- one man ownership
- no sharing of profits and risks
disadvantages
- one man’s capital
- unlimited liability, no separate legal identity
definition of:
franchisee
advantages and disadvantages?
uses idea or product to sell it to customers
advantages
- chances of failure reduce cuz well known product
- franchisor pays advertising
- supplies obtained from franchisor
- fewer decisions to make (price, product, store layout)
- training for staff provided
- banks often willing to lend due to low risk
disadvantages
- less independence
- unable to make decisions that would suit local area
- license fee paid annually
advantages and disadvantages of joint venture?
advantages
- sharing of costs
- risks are shared
disadvantages
- profits shared
- disagreements over important decisions
- clash of cultures
definition of:
public corporation
a business in the public sector owned and controlled by the gov
advantages and disadvantages of public corporation?
advantages
- essential services provided by gov
- avoid monopolists
- gov can nationalise it if business failing
disadvantages
- no private shareholders to increase capital
- no close competition, lack of incentive
- subsidies lead to inefficiency
definition of:
social enterprise
what do they do?
- a business with both social objectives as well as to make a profit
- generate income through business activities, reinvest profits into public/ community mission
definition of:
cooperatives
how does it work?
-a business which is owned and run jointly by its members who share profits and benefits
- all members have equal rights regardless the amount they invested
- profits equally shared
advantages and disadvantages of partnership ?
advantages
- raise capital from partner
- share ideas
- continuity
- responsibilities shared
- partners can specialise
disadvantages
-unlimited liability
definition of:
franchisor
advantages and disadvantages?
a business with a product or service idea that it does not want to sell to consumers directly
advantages
- franchisee buys license from them to use brand name
- expansion of franchised business is faster than franchisor financing all new outlets
- management of outlets is the responsibility of franchisee
- all products sold must be obtained from franchisor
disadvantages
- poor management lead to bad reputation
- franchisee keeps profit
