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bs > Chapter 4 Types of business organizations > Flashcards

Chapter 4 Types of business organizations Flashcards

1
Q

What is a sole trader business

A

Owned and operated by one person.

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2
Q

Characteristics of a sole trader business

A

Very mobile
Very cheap to start
Few legal requirements

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3
Q

Advantages of a sole trader business

A 
Complete control over business 
Freedom to choose holidays and employees 
Keeps all the profit to himself 
Easy to exit 
No extra taxes
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4
Q

Disadvantages if a sole trader business

A

Unlimited liability
Nobody to discuss decisions with
Need to be multiskilled
Less continuity

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5
Q

2 Types of unincorporated businesses

A

Sole trader

Partnership

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6
Q

What is a partnership business

A

Group or association of at least two people who agreed to run a business (max 20 people)

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7
Q

What is a deed of partnership

A

a legal binding document for the partners.

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8
Q

Characteristics of a partnership business

A

All the partners contribute to the business - investments or capital.
All the partners will have a say in the running of the business

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9
Q

Advantages of a partnership

A

Potential for more finance or access to capital
Longer lifespan
Shared workload
Partners can specialize in different tasks

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10
Q

Disadvantages of partnerships

A

Make all decisions together
Share the profits
Unlimited liability

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11
Q

Types of incorporated businesses

A

Private Limited Company

Public Limited Company

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12
Q

Characteristics of pvt ltd companies

A

Shares are private, aren’t offered on a stock exchange

Owned by shareholders - 2 to 200

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13
Q

Advantages of a pvt ltd company

A

Provide the company with capital when you invest in the company
Longer lifespan of the company
Limited liability

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14
Q

Disadvantages of a pvt ltd company

A

Can’t offer shares to public

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15
Q

Legal documents signed in a pvt ltd company

A

Articles of association

Memorandum of association

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16
Q

Characteristics of a public limited company

A

has an AGM
minimum of 7 shareholders
Shares listed on a stock exchange

17
Q

What is an AGM

A

Annual general meeting - All the shareholders are invited in order to elect the next director of the company

18
Q

Advantages of a public limited company

A

More capital since more shareholders
Limited liability
Shares are more liquid
Continuity of the company

19
Q

Disadvantages of a public limited company

A

Danger to the original owners - can get voted out at the AGM
Legal formalities are very time consuming
Difficult to control since there are so many shareholders

20
Q

Who is the franchisor

A

The Franchisor is the original brand/company

21
Q

Who is the franchisee

A

the Franchisee is the outlet owner.

22
Q

Advantages for franchisor

A

Extra profits
Selling the rights gives profit
Very cheap and quick expansion method
Good marketing strategy

23
Q

Disadvantages for franchisor

A

1 poorly managed outlet could lead to a bad brand reputation for all outlets and brand

24
Q

Advantages for franchisees

A

Don’t have to advertise - brand building already done.

Don’t have to decide the price, products, etc.

Low chance of business failure

Easy to get loans to set up the shops, because the franchisee is working under a popular brand.

25
Q

Disadvantages for franchisees

A

No freedom of production (What to produce, how much to produce, etc).
Don’t get all the profits.
The license fee is very expensive.
Investment for the shop is expensive.

26
Q

What is a joint venture

A

Two or more companies agree to form a new child company together.

27
Q

Advantages of a joint venture

A

More profit for the parent company

Cost less to set up a new company

The strengths of both companies come together

Local knowledge of 1 company can help with the entry of the other company

Risk is shared between companies

28
Q

Disadvantages of a joint venture

A

Parents companies have to share profits.

Conflicts in decision making, etc could occur. The work culture, vision, etc could also conflict.

29
Q

Why are joint ventures formed

A

When one company is entering a new market, it may look to form a joint venture with a company that already exists in that market.

30
Q

What is an unincorperated business

A

Does not have a separate legal identity.

31
Q

What is an incorporated business

A

Businesses that have a separate legal identity.

32
Q

Who is a shareholder

A

Owners of a limited company. They buy shares that represent part ownership in a company

bs (36 decks)

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