Ownership Structures Flashcards
What’s a sole trader?
A business owned by one person
Advantages of a sole trader
Simple and easy to set up
You’re your boss- choose your hours
You alone get profit
Small start up cost- little capital needed
Disadvantages of a sole trader
Unlimited liability
Likely to work long hours- stressful
Often hard to raise capital
What’s unlimited liability?
Being personally responsible for the debts, as the business doesn’t have separate legal existence to the owner
What’s a partnership?
Where 2 to 20 people own a business
Advantages of partnerships
More ideas- more people (shared expertise)
More capital
Less hours- more people
Disadvantages of partnerships
Unlimited liability
Disagreements between owners
Each partner is legally responsible for what the other partners do
What’s a PLC (public limited company)?
A company where anyone can buy shares on the stock exchange
Advantages of a PLC
Easy capital
Can expand more quickly
Lots of publicity buy being on the stock exchange
Incorporated
Disadvantages of a PLC
Shareholders have little say in the company
Anyone could buy the majority of shares- gain control
Dividends have to be paid from profits
Have to have £50K to get on the stock exchange
Financial information can be obtained
What’s a LTD (private limited company)?
A company where shares are sold privately, to who the company wants
Advantages of a LTD
Limited liability
Being incorporated- can trade after owner dies
Can raise a lot of capital
Incorporated
Disadvantages of a LTD
Expensive to set up compared to partnerships- legal paperwork
Legally obliged to publish accounts
All shareholders must agree to sell a share to someone
What’s a public corporation?
An organisation owned by the government
What’s a co-operative?
A business owned and controlled equally by the people who use its services or by the people who work there
What is a deed of partnership?
A legal document stating the responsibilities of partners ie how profits and losses are distributed
What’s a franchise?
When someone buys into an existing business and acquires the right to use an existing brand name, and all their ideas
What’s a franchisee?
The person who buys the right from a franchisor to copy the business format
What’s a franchisor?
The person who sells the right to use a business idea in a particular location
What’s a benefit to having a franchise?
Less risky than setting up your own business
Well-known product and brand= lots of sales
What’s a problem of having a franchise?
You have less control over what happens to it
Have to pay part of the profit as a royalty payment
What’s good about a co-operative?
Everyone has an equal say no matter how many shares they own- democratic
What’s the main objective of a public-corporation?
To provide a good service for customers- NOT to make a profit
What’s a multinational corporation?
One that operates in several countries
