Types Of Buiness Flashcards
Sole trader
A person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses.
Advantages
- no disputes over decision making as you are your own boss
- keep all profits
Disadvantages
- unlimited liability
- no continuity
- can upset work life balance
Partnership
Legal form of business operation btwn 2 or more individuals who share management and profits, must sign a deed of partnership, no continuity.
Advantages
- decision making split btwn partners
- work load can be shared out
- can have sleeping partners
Disadvantages
- unlimited liability
- profit is split btwn owners
Priv limped company (LTD)
privately held small business entity, in which owner liability is limited to their shares, 50 or fewer shares, becomes a independent legal structure when it incorporates, it has continuity and a lot of paperwork to set up.
Public limited company (PLC)
A company registered under the Companies Act 1980 with statutory minimum capital requirements and shares offered to the public subject to the conditions of limited liability.
Unlimited number of owners
Difficult to set up as lots of paperwork
Has continuity
Advantages
- able to raise finance easily
- has limited liability
Disadvantages
- financial info is made public
- admin has to be constantly kept up to date which cost time and money
Franchise
An authorisation granted by a government or company to an individual or group enabling them to carry out specified commercial services.
Main owner sells it off to their owners who open up branches
Lots of paperwork
Continuity
Advantages
No business experience required to set up
Higher rate of success than start ups
Disadvantages
Profits have to be shared with the franchisors
Little room for creativity and individuality
Strategic alliance
Agreement btwn two businesses to work toward common objectives: share
- ideas
- capital
- technology
- risks
Mergers
Access more capital
Expansion is quicker than organic growth
Friction may arise
Growth may be limited to size of market
Loss of 2 companies
Organic growth
Time consuming
Franchises are hard to manage
Hard to inc market share if leading
Less risk than external growth
Financed internally
Build on company’s strengths
Take - over
Access to more capital
Straight into market
Econ of scale
Friction may arise
Business lacks expertise
High costs
Variation problems
Joint venture
Expertise and resources
Reduce risks
Friction
Objectives may change
Inbalance in investment
