Forms Of Business Flashcards
What type of business’s ownership of shares restricted?
Private limited companies
What type of business can sell shares on the stock exchange?
Public limited company
What is the suffix for a private limited company?
Ltd.
What is the suffix of a public limited company?
PLC
Define a sole trader?
This is someone who owns and runs a unincorporated business meaning that they do not only have unlimited liability but they are also responsible for costs.
What are the pros of being a sole trader
- more personal capital
- no legal entities required
- financial records remain private
- control over business
- easy to set up
- less public scrutiny
What are the cons of being a sole trader?
- unlimited liability
- must be very work orientated
- doesn’t get extra
Define partnerships
A business run by two or more owners. This type of business is also an unlimited liability and therefore is an unincorporated business, as they are a partnership risks, responsibility and costs are split .
What are the pros of being a partnership?
- more ideas
- costs are split
- more specialised
- flexible
- more capital
- easy to set up
- no legal entities
- less public scrutiny
What are the cons of being In a partnership?
- must split profits
- unlimited liability
- more susceptible to disagreements
- higher risk than PLCs
- if one dies/resigns whole company must dissolve
Public limited company definition?
This is a shareholder who allows public shareholders to buy shares from the stock market, this type of business is incorporated
What are the pros of being a PLC?
- limited liability
- more free time
- pay corporation tax-19%
- stock market floation
- ability to raise finance
What are the cons of being an plc?
- shareholders can influence stock market more
- flotation
- harder to set up due to legal entities and requirements
- little to no control
- more public scrutiny due to financial records being accessible
- hostile takeovers
Private limited company
This is a shareholder who sells shares privately ie to close family&friends and are an incorporated business
Pros of ltds
- limited liability
- trusted shareholders
- pay corporation tax
- private financial records
Cons of ltd
- harder to set up
- no flotation allowed
- profits are split
- sell shares at a discounted price
What is a franchise?
The replication of a successful business formula. Essentially when a business gives another business, the franchisee , permission to trade using the franchisors name and selling the franchisors goods and services
Define the role of a franchisor?
This is the owner of the franchise who sells buying rights to the franchisee so that they can own part of the franchise after paying additional costs and following the regulations of the business
Define the role of a franchisee?
This is the person who buys the rights to own a segment of the franchise from the franchisors
Pros of being the franchisor
- cheap investment
- decide how it’s run
- easier for growing
- economies of scale
Cons of being a franchisor
Could experience bad reputation
- in charge of the supply chain
- can bulk buy-less expensive
Pros of being a franchisee
- easier growth
- mentoring and support
- guaranteed publicity
- less pressure
Cons of being a franchisee
- no control over how its run
- must buy more expensive brand products
- must represent the brand well
Define a social enterprise
A business with primarily social objectives whose surpluses are principally reinvested for that person in the business or in the community, rather than being driven by the need to maximise profits for it shareholders plus owners.
AKA NO OBJECTIVE PROFIT
