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IGCSE Business > Chapter 4-types Of Business Orginisation > Flashcards

Chapter 4-types Of Business Orginisation Flashcards

(71 cards)

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1
Q

What is a joint venture

A

When 2 or more businesses start a new project together,sharing capital and profits.

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2
Q

Eg. Of joint ventures in real life

A

European joining with Chinese businesses in China, as they know the market need+consumer tastes

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3
Q

What are the advantages of joint ventures (3)

A

Shared costs
Shared risks
Local knowledge

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4
Q

What are the disadvantages of joint ventures (3)

A

Shared profits
Disagreements
Different styles-different cultures

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5
Q

What does the term “public” sector include

A

All businesses owned by state/school
Public services

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6
Q

What is a public corporation

A

A business in the public sector that owned and controlled rolled by the state

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7
Q

What does nationalized mean

A

Was once owned by public individuals and then purchased by the government

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8
Q

What are the main types of business organisation in the private sector (6)

A

Partnership
Sole trader
Private limited companies
Public limited companies
Franchises
joint ventures

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9
Q

What is the most common form of business organisation + why

A

Sole trader
Few legal regulations to be followed

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10
Q

What is the owner of a sole trader business called

A

Sole proprietor

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11
Q

What is a sole trader

A

A business owned and operated by 1 person

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12
Q

What are the legal regulations to set up a sole trader business(3)

A

Owner must register+send annual accounts to government tax office
Must observe laws which apply to all businesses in that industry (ie. alchohol lisence)
Name either needs to be registered at registrar of business names or on all business documents+sign saying who the owners are in the store

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13
Q

Advantages of sole trader organisations (7)

A

Own boss
Few legal regulations
Freedom of hours/decisions etc
contact with cumstomers
Incentive to work hard because
You earn all the profit(will suffer if you don’t)
Secrecy in business matters apart from the tax office

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14
Q

What is limited liability

A

Liability is limited to amount invested

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15
Q

What is unlimited liability

A

When owners are personally held responsible ofr debts of the business

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16
Q

Disadvantages sole trader organisations (6)

A

No one to discuss business matters with
Unlimited liability (business is not a separate legal entity)
Limited funds (capital)
Banks are reluctant to lend due to low credit store etc
Expantion limited to capital produced(unlikely to be high)
No continuity, business legally stops exhisting

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17
Q

What are situations appropriate for sole trader organisations (3)

A

New business
Not much capital needed
Mainly dealing with public/providing services direct contact=important

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18
Q

What is a partnership

A

2 or more people in an agreement to jointly run a business in which usually the partner/s who invested the most capital have a say in running the business and share profits.
Most countries have a max of 20 parttners

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19
Q

How could you set up a partnership

A

It is easy
Either you just ask(verbal agreement)
Or present someone with a partnership agreement/deed of partnership

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20
Q

Why is it recommended to have a deed of partnership/partnership agreement

A

Without it partners may disagree over who put more capital/ who is entitled to more profits, the agreement stops such debates as there is a legal document outlining those things.

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21
Q

What does a deed of partnership/partnership agreement contain (5)

A

Amount of capital invested by each partner
Taskes to be undertaken by each partner
Way in which profits will be shared
How long the parntership is expected to last
Arangements for absence, retirement and the admittance of new partners

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22
Q

What are the advantages of a partnership (5)

A

More sorces of capital (allows for expantion)
Few legal requirements
Shared responsibilities
Motive to work
Business information is private apart from the partners and the tax office

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23
Q

Disadvantages of a partnership organisation (5)

A

Unlimited liability
Unincorporated business
Partners can disagree+consulting takes time
If one partner is inefficient/dishonest the whole business suffers
Because most countries have a partner limit, business growth is limited to the capital produced by the 20
End with the death of a partner

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24
Q

When would it be appropriate to have a partnership organisation (3)

A

Wish to form a business with others and avoid legal complications
Where the proffesional body (ie. medicine) doesnt allow proffesionals to form a company
Partners are well known (ie. Family), simple way of involving several of them into the running of the business

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25
What is a limited partnership+abbreviation
LLP A partnership only availible in some countries where there partnership has limited liability but the shares cannot be bought or sold, as the business is a separate legal unit, there is continuity after death.
26
What is an unincorporated business+eg
A business that does not have a separate legal identity Sole trader Partnership
27
What are the types of limited companies
Public and private
28
true or false public limited companies are in the private sector
True
29
What is an incorporated business+eg
Companies that have a separate legal status from their owners Public and private limited companies
30
What does it mean if a company is incorporated
The company exists separate from the owners and would continue if one should die Company can make contracts/legal agreements Company accounts kept separate from accounts of owners
31
What are companies
Organisations that are joint owned by people who have invested in the business, shareholders.
32
What are private limited companies
Businesses that are owned by shareholders but cannot sell shares to the general public, cannot advertise their shares to the general public.
33
What are ways to show that a comany is a private limited (abbreviations etc)
Ltd/limited/(UK) Proprietary limited/Pty Ltd(ZA)
34
What is a stakeholder
Someone who has interest in the activities of the business
35
Who are the directors in a ltd(UK) company
The majority shareholders
36
What are the advantages of a private limited company (3)
Shares can be sold to a lot of people(some places have a max) All shareholders have limited liability=Less risky than sole/partnership People who started company keep control as long as they dont sell to many shares
37
What two important documents have to be sent where(private limited company)
Article of association Memorandum of association Registrar of companies
38
What does the article of association contain (4)
Rules under which company will be managed, holding of official meetings, rights+duties of directors, procedures after selling shares.
39
What does the memorandum of association contain (4)
Important information about the company and its directors, official name and address of registered offices, number of shares to be bought by each director and the objectives of the company.
40
What is the purpose of the memorandum and articles of association
To ensure company is correctly run and reassure shareholders abiut the structure and purpose of the company. These documents also allow for a certificate of incorporation to be issued by the registrar of companies to allow them to start trading
41
Why might some people be reluctant to invest in a pty ltd
They would struggle to sell their shares quickly if they needed their investment back
42
What arethe disadvantages of a private limited company(4)
Significant legal matters Accounts must be annually sent to registrar of companies and can be inspected by the public Cannot sell shares to public-difficult to raise large sums to reinvest Shares cannot be sold/transferred without agreement from other shareholders(cant quickly sell your shares if you need the investment back)
43
For what are private limited companies suitable for
Families/partnerships that wish to expand without further risk to their own capital. It allows more capital to be raised which is suitable for all except large companies.
44
What are public limited companies
Companies that can sell their shares to the public, the shares are tradeable on the stco exchange
45
What are advantages of public limited companies (5)
Limited liability Incorporated business(continuity) No limit to no. of shareholders-oppurtunity to raise large sums of capital No restriction on movement of shares Usually have high status-attract suppliers willing to trade on credit and banks willing to lend
46
Disadvantages of public limited companies (4)
Legal formalities of forming More regulations+controls to protect interests of shareholders eg. Disclosure of accounts+other info Selling shares to public is expensive/to “go public” Original owners may lose control, divorce between ownership and control
47
Other ways to refer to public limited companies
Plc-UK limited/ltd-ZA
48
What is an AGM
Annual General Meeting Legal requirement for companies. Shareholders may attend to vote for who they wants on the board of directors for the ccoming year
49
What are dividents
Payments made to shareholders from profit after tax. They are return to shareholders for investing in the company.
50
Who has control over a public limited company and what do they do
Company Directors, they run the business and take decisions. Appoint managers for day to day decisions. Manage the business to meet their own objectives, eg reduce dividents to fund expantion
51
What control do shareholders have over a public limited company
None other than they can elect proffessional managers as company directors at the agm
52
What is the divorce between ownership and control
Shareholders own, directors and managers control
53
What is the risk of: Sole trader Partnership Private limited company Public limited company
Carried by sole owner Carried by all partners Shareholders hold up to their original investment Shareholders hold up to their original investment
54
What is a franchise
A business based upon the use of brand name, logos and trading methods of an existing, succesful business. A franchisee buys a licence to operate the business from the franchisor.
55
What are the advantages to a franchisor (3)
All products sold must be obtained from them Expantion is faster than if they had to finance all the new outlets. Management is not their responsibility
56
What are advantages to franchisee (6)
Low chance of business failure (well known product) Franchisor pays for advertising Training for staff+management is provided Banks are more willing to lend Supplies are obtained from franchisor Everything is decided by franchisor
57
Disadvantages to franchisor (2)
Franchisee keeps profits from the outlet Poor management could lead to a bad reputation for the whole business
58
Disadvantages to franchisee (3)
Less independence May be unable to make decisions to suit local area Have to pay royalties/ % of annual turnover
59
What does the franchisor contribute to the business (3)
Brand name+products Originak idea Advertising+training
60
What does the franchisee contribute to the business (3)
Capital Management Enterprise
61
How does the control in a public corporation work
Government sets objectives and appoints ministers to the board of directors who manage the business in order to achieve the objectives
62
What are advantages of public corporations (4)
Considered important, ownership is essential If industries are controlled by monopolies it would be wasteful to have competitors(don’t need two railways) Important public services can still be made available to the public
63
Disadvantages of public corporations (4)
Less profit motive=less efficient Government subsides lead to inefficiency as managers think government will help if they suffer No incentive to increase consumer choice/efficiency because there is no close competition Businesses can be used for political reason
64
What is an objective
An aim/target to work towards
65
What is a business objective
Aims/targets that a business works towards
66
What are the benefits of setting objectives (4)
They give workers+managers a clear target to work towards Taking decisions is focused to what can help them achieve the objectives The managers can compare how they performed to the objectives to see success Clear and memorable objectives unite the whole business towards the same goal
67
What are the most common objectives for a business in the private sector to achieve (6)
Business survival Profit Market share Growth of business Return to dshareholders Service to comunity
68
What is the formula for market share
%=company sales/total market sales x 100
69
What is market share
% of total market sales held by one brand or business
70
What are social enterprises
Operated by private individuals in the private sector, but dont have profit as a motive, they have social objectives as well as an aim to make a profit to reinvest back into the business
71
Hat is the triple bottom line
Social Enviromental Financial

IGCSE Business (30 decks)

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