form of businesses Flashcards
what is an unincorporated business?
- the owner is the business - no legal differences
- unlimited liability
- most operate as sole traders
what is an incorporated business?
- legal differences between the business and the owners
- limited liability
- operate as private limited companies
what is unlimited liability?
means that the finances of the business are treated as inseparable from the finances
- the owner must pay all debts ( may mean selling house personal assets)
- can be made personally bankrupt
- sole traders and partnerships
what is limited liability?
- shareholders can only lose the value of their investment
- does not protect you against wrongful or fraudulent trading
what is a sole trader?
- is an individual who owns and operates his or her own business
- unlimited liability
Benefits of operating as a sole trader
- quick and easy to set up
- simple to run, the owner has complete control over decision making
- minimal paperwork
- easy to close/ shutdown
- complete confidentiality can be maintained as accounts arent published
Drawbacks of operating as a sole trader
- limited sources of finance
- longer hours to work
personal assets at risk- unlimited liability - can pay a higher tax rate than a company
what is a partnership?
- unlimited liability
- exists when two or more people start a business
Benefits of operating as a partnership
- quite simple
- more expertise and efforts of more than one owner
- provide specialist skills
- greater potential to raise finance
- share responsibility
Drawbacks of operating as a partnership
- unlimited liability
- poor decision by one partner damages the interest of the other partners
- complicated to sell or close
- disagreements in partners
what is a company?
is a legal entity, the owners of a company are shareholders
what is a limited company?
y
benefits of operating as a limited company
- limited liability - protects the shareholders
- easier to raise finance - shares
- a stable form of structure - business continues to exist even when shareholders change
disadvantages of operating as a limited company
- grater admin costs
- public disclosure of company information
- directors legal duties
what is a public limited company?
- more specialist type of limited company
- shares can be quoted and traded on a public
what are a public sector company and examples
a small number of companies who are controlled by the government e.g. network rail
what is a public sector organisation?
- provide goods and services which are owned and operated by public bodies
- funded by the government
- NHS
what is a social enterprise?
- not for profit organisation
- trade in order to benefit the community
- social aims
e. g. community development trusts, housing association
what is franchising?
the franchisor grants a licence (franchise) to another business (franchisee) to allow it to trade using the brand/ business format
advantages of operating as a franchise
- tested and developed format and brand
- advice support, training
- easier to raise finance
- still your own business
- no industry expertise is required
- lower risk method entry + lower failure rate
disadvantages of operating as a franchise
- not cheap, initial fees, royalties
- restrictions on actions, including selling
- the percentage of revenue expected by the franchisor
advantages for franchisor (person)
- classic growth strategy for a proven service business format
- rapid geographical growth for a minimum investment
- still have the option to open souls branches
what is a lifestyle business?
- used to describe a business that generates only a living for the owner
- business objectives tend to be less important
what is an online business?
lower costs, and high potential revenue with worldwide available
