Section 4: Types of business organisations Flashcards
Sole Trader
A business that is owned and cotrolled by just one person who takes all of the risks and recieves all of the profits
When an enterprenuer starts a business what factors will it depend on
- Level of personal risks
- Advice
- Level of privacy
Unlimited liabiltes
Owners are fully reponsabile for all the debts owned by the business
Limited liabaity
They can only loose the original amount invested
Advantages of sole traders
- Easy
- Inexpensive
- Complete control
DisAdvantages of sole traders
- Unlimited liabaility
- Limited access to finace and capital
- Limited skill set of the enterprenuer
Partnership
Two or more enterprenuers come together to manage a business and share profits
Advantages of partnerships
- Easy
- Inexpensive
- Share reponsabilities
- More skills and knowledge
- Increases access to finace and capital
DisAdvantages of partnerships
- Unlimited liabilty
- Arguments
- Profits shared equally even if one worked harder
- Difficult to transfer ownership to new owners.
Private limited companies (LTD)
Smaller privately owned and easier to control.
Difference between limited and unlimited liabillities
- Risk
- Control
- Investments
Risk: UL= Higher personal
COntrol: UL: Full control
Investements: UL: Harder to rasie money
Private limited companies (PLC)
Larger privately traderd and able to raise funds however with less control
Advantages of LTD
- Limited liabailities
- Control
- Easier to raise funds
DisAdvantages of LTD
- Limited access to cpaital
- Restricted share
- Limited size
Advantages of PLC
- Limited liabailites
- Access to capital
- Easier to grow
DisAdvantages of PLC
- Loss of control
- Costly and complex
- Pressure
Joint Venture:
Two or more busienss collaborated to achieve a shared goal with shared reasources and risks.
Franchise
A business buys the right to operate under an established brand with support haowever with less control.
advantages of joint ventures
- Sharedd reasourcse
- Risk sharing
- Access to new markets
Disadvantages of joint ventures
- Shared contold
- Shared profits
advantages of Franchise
Established brand
Support and training
Lower risk of failure
Disadvantages of Franchise
- Fees and royalites
- Limited control
- Proft sharing
Unicorporated
No legal seperation between the business and owners Owners have unlimited liabilites
ex sole traders and partnerships
Incorporated
Business have its own legal identity owners have limited iliabilty
Public corporations
Owned by the governmet
