Module 1 Flashcards
Sole trader
A business venture ran by one person who has full control of the business. They may employ other people to carry out different functions. They are also responsible for allocating all necessary resources to run the business.
What are some advantages of sole trader?
- Simple to form due to few legal requirements
- Decision-making is quick due to one person having total control and do not need to consult with any board members
- Profits are not shared
- Owner is motivated since he’s self-employed
What are some disadvantages of sole traders?
- Responsible for providing all capital (hard to obtain loan and time consuming)
- Unlimited liability: if cannot pay debt, they may lose personal assets
- Long working hours: has all the responsibilities (may also avoid employing to cut costs)
Partnership
A business where 2 to 20 people work together towards a common goal of making profit.
The partnership is governed by a legally binding agreement called partnership deed.
What are advantages of partnerships?
- More pooling of resources (especially financial and management resources)
- Better work/life balance: the responsibilities are shared
- Specialization (partners can specialize in a given afea)
- Better decision making (different perspectives)
What are disadvantages of partnerships?
- Disagreements
- Decision-making is slower due to a number of partners
- Unlimited liability
What is a limited partnership?
A limited partnership is when two or more partners go into business together, but the limited partners are only liable up to the amount of their investment.
It consists of a general partner and limited partner. The general partner oversees and runs the business while limited partners do not partake in managing the business.
They only invest in the business (silent partner).
General partner: unlimited liability
Limited partner: limited liability
Franchise
Franchise is a business that was granted a right to market and sell goods from an already established business.
It involves a franchisor, one who establishes and trademarks a business, and the franchisee, one who pays the franchisor royalty fees to be under the business’s name and system.
What are advantages of franchise?
For franchisor:
1. Increase market share
2. Additional Source of revenue
For franchisee:
1. Training is provided by parent company
2. Already establish a position in the market and gain market share
3. Advertisement cost is reduced
4. Less likely to fail
What are disadvantages of franchises?
- Lack of control and cannot use entrepreneurial skills and limited creative experience
- Pays royalties fees
- Must abide by terms and conditions of contract
Limited Liability Company/ Cooperation (LLC)
a business entity that protects individuals from being liable for the company’s financial losses and debt liabilities.
It contains shareholder and managed by a broad of directors. Each member is liable up to the amount they contributed in shares.
What are some advantages of LLC?
- Limited liability: helping protect against personal liability and personal assets of LLC members, in the case of legal consequences.
2.
What are some disadvantages of LLC?
Private company
Non-Governmental Organizations
An organization established by a group of voluntary individuals which are formed at local, national and internet level.
They do not aim to generate a profit and is formed to:
- provide humanitarian functions
- offer aid and relief in time of disastera
- addresses social issues
They are not formed by the government nor answer to them.
What are examples of NGOs?
- Community based organizations (CBO)
- Social enterprises
- Charities
- Foundations
Cooperative Societies
A form of a business consisting of a voluntary group of individuals who work together to promote economic interest.
What are advantages of cooperatives?
- Limited liability
- Profit is shared among members
- Members have say in the business operations (voting)
- Economies of scale
What are disadvantages of cooperatives?
- Minimal profit
- Conflict
- Decision-making is long
Types of cooperatives
- Consumer cooperative: provide members with needed items at reduced profits
- Producer cooperatives: share productions and altering facilities (Econ of scales)
- Worker cooperative: provide employment, contribute through purchasing shares
State-owned enterprises
A business entity created by the government to partake in commercial activities.
Why is registering a business important?
- Access to loans and grants
- Build consumer confidence
- Obtain contracts
- Open bank accounts in business name
Why is labor laws important?
It aims to protect its workers’ rights and highlights the employers’ obligations (moral actions) and responsibilities.
What are some labor laws?
Contract laws, legal contract, sales contract, leases
Labor laws
Laws that deal with the legal rights of working people and the organization they work for
Examples of personnel laws
Hiring/firing policies, income tax, general consumption tax, property tax, collective bargaining
Why is occupational safety and health laws important?
Reduces injuries or accidents by identifying and mitigating hazards of workers and consumers
- Low labor turnover
- improve employee Morale (safe environment = less stress)
- improve productivity
- reduce cost of worker’s compensation
Examples of occupational safety and health laws
Consumer
Institutions
International Standards and Regulation
Quality management standard to help work more efficiently and reduce product failure
Intellectual property protection
The rights govern to persons over the creations of their mind
Patent
Protects inventions
Copyright
A property right granted to authors or literary and artistic work
It protects the work from authorized duplication for commercial purposes.
Trade marks
Any distinctive word,name, symbol or device (appearance) that an entity used to distinguish themselves
Trade secret
Any confidential information that gives a business a competitive edge
Open innovation
The practice of businesses outsourcing ideas from external sources to drive innovation
Environmental stewardship
The response used and protection of the natural environment through conservation and sustainable practices
Tax
Mandatory contribution imposed on individuals and business by the government
Examples of international standards and regulations
ISO
duty of care
Occupational, Safety and Health Administration
Social Entrepreneurship
The process of creating social impact and value by organizing resources in a creative and innovative way to meet social needs
Business ethics
Moral principles that act as guidelines for the way a business conducts itself and transactions
Eg. data protection, workplace diversity,
Business integrity
The act of conducting business practices by following moral and ethical framework
Code of ethics
A statement of specific rules and standards for a variety of situations which guides the employee’s behavior
Business etiquette
Set of rules that govern the way those in business interact with one another, customer, suppliers and partners
Corporate social responsibility
Business mode that helps a company be socially accountable to itself, its stakeholders and the environment
Good corporate governance
The process in building an environment of trust, transparency and accountability for fostering long term investments and business integrity
