type of business organisation Flashcards
name businesses in private sector business
sole trader
partnership
limited companies
franchise
joint venture
define sole trader
a business that is owned and controled by just one person who takes all the risk and recives all the profit
why people choose sole trader business
be their own boss and make their own decision
decide when and how many hours to work
have a business that use their skills and interest
what are the advantage of a sole trader business
easy to set up
make all the decisions
has complete control
keeps all the profit
what are the disadvantage of sole trader
unlimited liability responsible for business debt
may not be able to raise fund
may have to work long hours
difficult to compete with larger rivals
may not have business skills to run a business
define partnership
a business formed by two or more people who will usually share responsibility for day to day running of the business
what are the advantage of partnership business
easy to set up deed of partnership
partners invest in the business so greater access to fund
shared decision making
shared managment and workload
what are the disadvantage of partnership
unlimited liability
shared profit
business ceases to exist if one partner leaves
desicions binding on all partner
difficult to raise finance
define unicoporated business
a business that does not have leagal identity separate from its owner. the owner have unlimited liability for buisness debt
define unlimited liability
if an unicoporated business fail then the owner might have to use their personal wealth to finance any business debt
define shareholder
a person or organisation who owns shares in a limited company
define private limited company
often a small to medium sized company owned by share holders who have limited libility the company cant sell its hare to general public
define public limited company
often large company owned by share holders who have limited liability the company can sell its share to general public
define ordinary share holder
the owner of limited company
define limited laibility
the share holders in a limited company fails which only risk losing the amount they have invested in the company and not any of their personal wealth
define dividend
a payment out of profit to share holders as a reward for their investment
what are the features of limited companies
. legal document Aa Ma
. shareholders invest capital by buying shares of the company
. ordinary share holders are the owner of the company
. have limited liability
. continues running even one owner dies
. profits are shared
what re the owners ofPLC
small number of share holders often members of the family or friends
size of PLC
small compared to PULC
define collateral
non-current assets offered as security against borrowing
disadvantage of public limited companies
legal formalities
. directors decision making is somtimes influenced by major investors who seeks to satisfy there own objectives
. risk of take over
define franchise
a business system where enterprenure buy right to use the name logo and product of existing business
benifits of franchise
less chance of faliure
franchisors often provide advice and training to franchisee
franshisor will finance the promotion through national advertising
. guranteed quality suppiles
limitation of franshising
initial cost of buying into a franchise can be expensive
franchisor will take persantage of revenue or profit
strict control
franchisee still have to pay for local promotion
define joint venture
two or maore business agree to work together on a project and set up a separate business for this purpose
what is the main reason for joint venture
it reduce risk for each business and cut cost
bring different experties to the joint venture
market and product knowledge can be shared
limitation for joint venture
any mistake can damage reputation of all firms
may have different business culture so difficult in desicion making
