Section 2 Flashcards
What is LTD?
Private limited company
What liability does LTD companies have?
Limited liability
- if the business is in a loss or survival crisis, the people’s personal life will not be affected by it.
What are the advantages of an LTD company?
- limited liability
- an increase source of finance (money)
- more expertise (specialised people) available
What are the disadvantages of an LTD?
- competitors can see your account (unlike partnership or sole trader)
- can’t sale shares to the general public
- greater legal constrains (stricter contracts with governments)
Who controls the business on both LTD and PLC companies?
The board of directors
What is an annual general meeting?
Where shareholders get to decide/vote on important decisions relating to the business.
- in PLC and LTD
What should an LTD company do to change into a PLC company?
It has to change its certificate of trading and memorandum of association
Then re-submit to the registrar of companies
What are the advantages of a PLC company?
- can employ specialists
- as firm is big - it’s easier to negotiate with suppliers
- can get more money by selling shares to the general public
- shares can be given to workers (to motivate them)
What are the disadvantage of a PLC company?
- firm can be taken over (anyone with enough money can buy a 51% share and take over)
- accounts can be seen
- expensive to set up - register
What is a memorandum of association?
Information about company
Information about the people involved in the business
What is an article of association?
The rules for running the company
Contract
To what must a PLC and LTD company must be registered to? How?
To the companies house
They need to send the memorandum of association (details) and the article of association (contract)
What are minority shareholders?
Private individuals who own a very small percentage share of the business
What are the major shareholders?
Someone or a firm owning a large percentage of shares in a business
Once you have a separate legal identity, what liability do you have?
Limited liability
Who is a director ?
Someone who looks after the business
What is a chairman ?
Someone who is the boss of the director
What makes shares increase in value (price)?
- when the economy is doing well
- when someone wants to take over by buying a lot of shares
- when the prospect (likelihood of something to happen) of business is good
- asset value of business has increased
What is a franchise/ franchisor?
A firm or business who own let’s a franchisee copy their brand.
What is a franchisee?
Someone that is using the brand name of the franchisor
What does the franchisee owe to the franchisor ? - as it is using its business to make profit
Owes a big share of the profit the franchisee will make
What are the advantages of a franchisee?
- trading under the name of a successful brand
- support is provided
- training is provided
- help with location of business
What are the disadvantage of being a franchisee?
- give shares of profit to the franchiser (pay royalty)
- initial set up fee (expensive)
- bad reputation on franchisor will affect the franchisee’s business
What is a royalty?
A payment for the franchisor from the franchisee based on how much profit it made
What is the definition of franchise?
A marketing arrangement that allows another business to trade in using the same name and style of the existing business.
What do you need to make sure as a franchisor?
- the franchisee’s business is at the correct location (urban place)
- franchisee is successful
- if the franchisee has skills
- no competition in the same market
What does a franchisor need to know about a franchisee before the franchisee starts the business?
- trained well
- supports offer
- have skills
- agrees to conditions and restrictions (the agreement’s duration and how the business will be run)
- initial and ongoing costs (will the franchisee be able to afford it)
What is a cooperative?
An organisation owned by a group of people that provides goods and services
What are the cooperatives for?
To benefit the owners with money
What is a good thing about a cooperative?
Every employee has a share of the profit (has a share in the company which is also knows as a PART OWNER)
This makes everyone motivated and working together
Makes the cooperative more successful
What is a disadvantage of cooperatives?
Cooperatives find it difficult to grow due to LIMITED CAPITAL
