Topic 3-Business Ownersip Flashcards
Micro business
- 95% of firms are micro
- Less than 10 employees
- Turnover less €2m(£1.7m)
- Balance sheet total less than €2m
Small business
- Less than than 50 employees
- Turnover less than €10m(5.6m)
- Balance sheet total less than €10m
Medium business
- Less than 250 employees
- Turnover less than €50(£22.8m)
- Balance total less than €43m
Large business
- More than 250 employees
- Turnover more €50m(£22.8m)
- Balance total sheet more than €43
Private sector
Businesses owned and controlled by private individuals.The main aim is usually to make a profit
Unlimited liability
- The owner and the business have the same legal identity
- If the business fails the owner has to pay all debts of the business including having to sell personal possessions
- Sole traders and partnerships have unlimited liability
Limited liability
- The owner and the business have a separate legal identity
- If the business fails the owner or owners only lose what they have pit into the business.
- Private and Public Limited companies have this.
Sole trader
- A business owned and controlled by one person
- Typical examples can be found in hairdressing,plumbing and dressmaking
- It is the most common type of business organisation(1/4 of firms)
Advantages of being a Sole Trader
- Make all the decisions
- Easy/cheap to set up
- Keep all the profits
Disadvantages of being a Sole Trader
- Unlimited liability
- No shared responsibility
- Lack of Capital
Partnership
- A business owned and controlled by between 2 and 20 partners who contribute capital and expertise to the enterprise
- The rules of the partnership are outlined in the Deed of Partnership
- Typical firms that are run in this way are doctors,dentists and accountants
Advantages of a partnership
- More specialisation therefore more expertise
- Shared responsibility therefore less pressure
- More capital therefore easier to grow
Disadvantages of a partnership
- Share the profits therefore less money for yourself
- Shared decision making therefore if one partner makes a mistake it affects everyone as well
- Unlimited liability
A limited company
- A company is a group is a group of people who have joined together to form a business
- These people own shares in the company
- Owned by the shareholders
- Run by the board of directors who are voted on at the AGM(annual general meeting) (usually shareholders)
How to form a limited company
- All limited companies have to be registered with the registrar of companies
- This is a more complicated and lengthy process and a number of documents have to be produced including:
- Memorandum of Association
- Articles of Association
- Trading Certificate
Private limited company
- A business owned by shareholders and controlled by a Board of Directors
- Shareholders will be family and friends
- Shares are not available to everyone
- The company will have will have the letters ltd after its name
Advantages of a limited company
- Limited liability
- Easier/Cheaper to set up than a PLC
- Economies of scale
Disadvantages of a limited company
- Publish more information than a sole trader or partnership
- Shares can only be bought by family and friends
- Shareholders receive a share of the profits in dividends
Public Limited Company
- A business that is owned by shareholders and controlled by a board of directors
- Shareholders can be anyone as they are traded freely on the stock market
- It will have the letters plc after its name
Advantages of a Public limited company
- Limited liability
- Easier to gain finance by selling shares on the stock exchange
- Economies of scale
Disadvantages of a Public Limited Company
- Expensive to set up
- More vulnerable to a takeover
- Slow decision making
Franchise
This is where as franchisor gives franchisee permission to seek their well know product.Examples include McDonalds,subway,The body shop.
Franchisor
The business that gives permission to the franchisee to sell the product.Franchising allows them to grow more quickly
Advantages to the Franchisor
- Easier and quicker to expand
- Profit from sales
- Highly motivated franchisees
Disadvantages to the franchisor
- Loses management of the day to day running of the outlet
- A poor franchisee can damage the reputation of the whole business
Franchisee
The individual who is setting up a business selling the already established product.The advantage is that because it is already established there is less risk
Advantages to the franchisee
- Reduced risks
- Protected market area
- Training and support from the franchisor
Disadvantages to the Franchisee
- Does not have complete control of the running of the business
- Does not have the right to sell the business without the agreement from the franchisor
- Royalties have to be paid to the franchisor
