Key Terms - Unit 1.2 - Understanding Different Business Forms Flashcards
Unincorporated Business
There is no distinction in law between the individual owner and the business itself.
The identity of the business and the owner is the same.
Such businesses tend to be sole traders or partnerships
Incorporated Business
This has a legal identity that is separate from the individual owners.
As a result, these organisations can own assets, owe money and enter into contracts in their own right.
Such business include private limited companies and public limited companies
Unlimited Liability
A situation in which the owners of a business are liable for all the debts that the business may incur
Limited Liability
A situation in which the liability of the owners of a business is limited to the fully paid-up value of the share capital
Sole Trader
A business owned by one person.
The owner may operate on their own or may employ other people
Private Limited Company
A small- to medium- sized business that is usually run by the family or the small group of individuals who own it
Public Limited Company
A business with limited liability, share capital of over £50,000, at least two shareholders, two directors, a qualified company secretary and, usually, a wide spread of shareholders.
It has ‘plc’ after the company name
Ordinary Share Capital
Money given to a company by shareholders in return for a share certificate that gives them part ownership of the company; ordinary share capital is permanent, so a business will never be required to repay the value of these shares to their owners
Market Capitalisation
The value of outstanding shares in a public limited company.
Outstanding shares are the total of all ordinary shares issued and fully paid up
Market capitalisation is calculated by multiplying the total outstanding shares by the current market price of an individual share
Shareholder
The owner of a limited company; any person, company or other institution that owns at least one share in a company
Share Price
The price of a single share in a company; share prices are usually determined by the supply and demand for shares
Mutual Societies (Mutuals)
Exist to provide mutual benefits for their members
They are owned and democratically controlled by their members
Their purpose is usually to raise funds from their members or customers, which are then used to provide common services to their members
They include; building societies, mutual insurance companies, co-operative and community benefit societies
Charity
Organisation that has exclusively charitable purposes, exists for the public benefit
Cannot make profit and all money raised must go towards achieving its stated aims
It cannot have owners or shareholders who benefit from it
Most charities are regulated and registered with the Charity Commission
A charity is not a legal structure
