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BUSINESS U1 > TYPES OF BUSINESS ENTITIES > Flashcards

TYPES OF BUSINESS ENTITIES Flashcards

1
Q

Public Sector

A

The businesses in the public sector are owned by the government. They are state owned enterprises. Companies in the public sector provide essential goods services that the private sectore would not be usccessful at providing.

Examples: Electricity and water companies

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2
Q

Private Sector

A

The businesses in the private sector are owned by individuals or groups. The aim of these businesses is to generate profit.

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3
Q

Types of businesses in the private sector

A
  • Sole traders (unincorporated)
  • Partnerships (unincorportared)
  • Private + public limited companies (incorporated)
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4
Q

What are sole traders?

A

Sole traders are businesses owned and ran by one individual. The owner is liable for all the buisness debts, there is no legal separation between the owner and the business (unlimited liability).

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5
Q

Advantages of being a sole trader

A

1- Fewer legal formalities
2- Personalized service
3- All profit goes to owner
4- Easy deciswion making
5- Financial account information is private
6- Autonomy
7- Set up costs are inexpensive and quick

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6
Q

Disadvantages of being a sole trader

A

1- Unlimited liability
2- Workload + Stress
3- Limited economies of scale
4- Limited access to finance
5- High risk
6- Lack of continuity

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7
Q

What are parterships?

A

Parterships are a form of business owned by two or more individuals.

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8
Q

Advanatges of Partnerships

A
  • More expertise and knoledge
  • Continuity
  • Financial strength (More partners=More personal funds)
  • Less risky than sole traders
  • Financial privacy
  • Set up costs are cheap and quick
  • Specialisation + Expertise due to dividion of labor between the multiple partners
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9
Q

Disadvantages of Partnerships

A
  • Unlimited liability
  • Risk of disagreement
  • Profits must be shared
  • One partner might do all the job while the other one just benefits.
  • Not full control over the business
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10
Q

What are companies?

A

Companies are businesses owned by their shareholders. Companies are incorportaed businesses which means that there is a legal division between the business and the share holders. In a company there is no financial privacy. The more shares a person owns the more influential they are to the company.

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11
Q

Types of companies

A

1- Public Limited company
2- Private limited company

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12
Q

What is a private limited company?

A

It is a company that sells its shares within the company or to family and friends. In this type of business there is usually around 20 shareholders and they are very influential to the company. These tend to not raise as much capital as public limited companies but they are less risky.

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13
Q

What is a public limited company?

A

It is a type of company that raises share capital through selling shares publicly in the stock market. The share holders aren’t as influential because there are many and it is riskier (Dillution of control). However, they raise a lot of capital. These companies can be taken over.

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14
Q

Advanatges of Companies

A
  • Limited liability
  • Finance is more available because they are seen as more stable businesses.
  • Higher chance of continuity
  • Bigger chance of expanding thanks to its continuity and access to finance.
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15
Q

Disadvantages of Companies

A
  • Legal requirements must be filled out. These are cost and time consuming.
  • Can’t fully control who buys the shares
  • Can’t control external factors that might affect the stock market and therefore lower the company’sn share values.
  • Loss of privacy because it is mandatory to publish accounts.
  • Risky. Selling shares does not guarantee that the amount of finance desired will be raised.
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16
Q

What are For-Profit social enterprises?

A

They are a form of business with a social aim, meaning that their aim is to improve the human, social or enviormental wellbeing. They don’t have the same priorities as other forms of businesses such as maximizing profit, what their true priority is, is the social aims.

They do care about maximizing profit, increasing revenue streams, etc. However, if by wanting to achieve these aims they are not able to fufill their main priority which is social well-being they will not give importance to profits, revenue etc

17
Q

Features of For-Profit Social Enterprises

A
  • They operate the same functions as any other business - Care about financial sustainability
  • Profit is important but social aim takes precedence.
  • High degree of collaboration between the business and the local community.
18
Q

Advantages of For-Profit Social Enterprises

A
  1. Stakeholders benefit
  2. Strong communal sense - Workers have a sense of blongig and feel good and motivated by doing something good for society.
  3. Favorable Legal status
  4. Employees have decision making power
  5. Social Benefits
19
Q

Disadvantages of For-Profit Social Enterprises

A
  1. Limited sources of finance
  2. Capital may be insufficient for growth and financial strength.
  3. Complex + Time consuming decision making
20
Q

What is a Cooperative?

A

It is a form of partnership where all the memebers run and own the business. There are many memebers and they all share profits. It is very common in agriculture.

21
Q

What is a Non-Profit Social Enterprise

A

It is a form of business very similar to For-Profit social enterprises in terms of having a social aim. However they do not generate any profit whatsoever. They generate surpulses and these are reinvested into the social vause that the business was set up for.

22
Q

Surplus

A

Total Revenue - Total Costs

23
Q

NGOs can be:

A
  1. Focused on one specific social cause
  2. Have political aims
  3. Have/Or no political affiliations
24
Q

What is an NGO?

A

An NGO is a Non Governmental Organization. Its aim is to support a cause that is considered to be socially desireable.

25
Q

What is a Charity?

A

A charity is a form of NGO. Its aim is to provide as much relief as possible to those in need. Unlike NGOs, charities focus on phylantropy and helping those who cannot help themselves. Charities operate in the private sector since they are a form of NGO

26
Q

Features of Non-Profit Enterprises

A
  1. Don’t generate profit, only surpluses
  2. Donations are important because they can’t rely on government funding.
  3. Unclear ownership and control
27
Q

Advantages of Non-Profit Social Enterprises

A
  1. Social Benefits, helping people or a social cause.
  2. Can foster socially constructive views, positive attitudes in a community make it a better place to live and improve the general business climate.
  3. Public Recognition
28
Q

Disadvantages of Non-Profit Social Enterprises

A
  1. Charity Fraud
  2. Limited sources of finance
  3. Funding can be irregular
  4. Inefficiency

BUSINESS U1 (15 decks)

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