Different Types Of Business Ownership Flashcards
Sole trader is?
Business owned by one person
Sole trader advantages
Low start up costs - trade immediately, register with tax authorities
Profits all go to you
No conflict between others
Disadvantages of sole traders
Limited liability- bankruptcy, banks can take personal assets
Workload is high
Raising finance- banks see as risky
Partnership is?
Business consisting of 2-20 people that have signed a deed outlining the rules and regulations for each partner
Partnership advantages
More capital/raising finance - 20 people seen as less risky than sole traders
Financial affairs are private - only tax authorities
Specialisation
Partnership disadvantages
Unlimited liability
Conflict between partners
Loss of autonomy- must consult partners
Loss of continuity- death could lead to dissolve
Private limited company is?
Small group of family and friends, cannot be bought shares by the public, shareholders get dividends each year
LTD advantages
Limited liability- only liable for their investment
Raising finance - seen as less risky
Specialisation
LTD Disadvantages
Lack of privacy- submit financial affairs
Set up costs are high and time consuming- accountancy fees
Corp tax- based on company profits
PLC is?
Largest type, shares can be bought on the stock exchange
PLC advantages
Limited liability
Large capital- whole public can buy shares
Banks are willing to lend not seen as risky
Economies of scale - size, get better deal from suppliers, buy in bulk at lower price etc
PLC disadvantages
Financial affairs made public- register of companies
Slow decision making - meetings
Expensive - accounts, solicitors
Threat of takeover - competitors can buy majority shares
Limited companies are owned and managed by?
Owned by shareholders managed by board of directors
Franchises are?
A business owner, franchisor, gives permission to a franchisee to set up a business using the business name and resources
Franchisee advantages
Well known brand name
Defined territory
Assess to finance - banks willing to lend
Franchisee disadvantages
Loss of control- must get approval for everything
Interdependency- negative image in when place effects the whole brand
Less individuality- all shops organised and decorated the same
Franchisor advantages
Growth and expansion
Profits - pays royalties
Management - doesn’t have to be involved day to day
Franchisor disadvantages
Loss of control- little day to day input
Interdependency
Diseconomies of scale - grow to quickly leading to communication, coordination and motivation problems
Private v public - ownership
Private individuals
Country or state
Private v public - Purpose/aim
Provide a service
Make profit
Private v public - Control
Private owners or bod
Central gov or local authorities
Private v public - Finance/capital
Raised by owners or bank loans
Taxes from treasury by gov
Private v public - Profits
To owners or invested
Treasury or invested
