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
What’s good about a multinational corporation (for them)?
Cheap raw materials
Cheap labour
Friendly government policies
What’s bad about multinational corporations (for the public)?
They push smaller firms out of the market
Slave labour
Pollution
What does incorporated mean?
A company has their own legal identity and can sue or own assets in their own right
What type of businesses are incorporated?
PLC and LTD
