Theme 1 Topic 3 - Forms of Ownership Flashcards
Define Unincorporated Business
There is no distinction in law between the individual owner and the business itself
What are two examples of unincorporated businesses?
Sole Traders and Partnerships
Define Incorporated Business
This has a legal identity that is separate from the individual owners
What are two examples of incorporated businesses?
Private Limited Companies and Public Limited Companies
Define Unlimited Liability
The owners of a business are liable for all the debts that the business may incur
Define Limited Liability
The shareholders of a business have no responsibility for paying the debts incurred by their business as long as they have paid in full for the shares they have purchased
Define Sole Trader
A business owned by one person, who may operate on their own or may employ other people
What are two advantages of being a sole trader?
Keep all profits, Keep all control
What are two disadvantages of being a sole trader?
Little capital for expansion, Unlimited liability
Define Partnership
Two or more people operate for the common goal of making a profit
What are two advantages of being a partnership?
More than one person invests in the business, Can have limited liability if they are a sleeping partner or its a Limited Liability Partnership
What are two disadvantages of being a partnership?
Usually have unlimited liability, Have to share profits and control
Define Private Limited Company (Ltd)
A company owned by shareholders who were invited to buy a share and invest capital in the business
What are two advantages of being an Ltd?
Limited liability, Raise finance through sale of shares
What are two disadvantages of being an Ltd?
Less control over decision making, Have to share profits
Define Private Limited Company (Plc)
The shares are sold on the stock exchange which means anyone can buy a share
What are two advantages of being a Plc?
Quick way to raise finance through selling shares on the stock exchange, Limited liability
What are two disadvantages of being a Plc?
Little privacy, May lose control if too many shares are bought by one person
Define Lifestyle Business
Some entrepreneurs start a business based on their personal needs and wants
Define Online Business
Internet allows firms to set up with low capital outlay
Define Social Enterprises
These firms have a social mission - they exist for the good of society rather than making profits
Define Franchise
A license to use a business format of another firm
Define Franchisee
A business that pays royalties for the right to use the format and brand of another firm
What are two advantages of being a franchisee?
Advertising and training paid for, Established brand/product
What are two disadvantages of being a franchisee?
No space for entrepreneurial ideas/creativity, Have pay royalties
Define Franchisor
A business that allows other firms to use its brand and format in exchange for royalty fees
What are two advantages of being a franchisor?
Gets paid royalty, Cheap way to expand/distribute more
What are two disadvantages of being a franchisor?
Actions of franchisee reflect on franchisor, Have to pay for all advertising/training
