Types of business organisation 1.4 Flashcards
What is a sole trader
Business that Is owned by one person
Advantages of sole traders
Few legal regulations to set up business
Freedom to choose hours of work, holidays and rest
Disadvantages of sole traders
Unlimited liability therefore you are responsible for all losses of the business
No one to help take care of business if you are sick or ill
What is a partnership
Business where 2 or more people agree jointly to own a business
Advantages of a partnership
Responsibilities of the business is shared
More capital is able to be invested from owners
Disadvantages of a partnership
Business does not have a separate legal identity meaning if one partner died the whole business will end
Partners can disagree on decisions leading to time being wasted asking all partners on a solution
What is a private limited company
Business owned by shareholders but cannot sell shares to public
Advantages of Private LC
Shares can be sold to a large number of people usually family or friends
All share holders have limited liability
Disadvantages of Private LC
Shares cannot be sold to anyone else unless agreement from other shareholders
Accounts of the company are shared to the public allowing more information about the business to be known
What is a public limited company
Businesses owned by shareholders but are able to sell shares to public
Advantages of Public LC
Limited liability
NO limit on number of shareholders the company is able to have
Disavantages of Public LC
Selling shares to public is expensive
Original owners can get very rich selling shares which can lead to losing control over the company
What is a franchise
Business based on use of brand names and of existing businesses
Advantage of Fracnhises
Training and staff is provided by franchisor
All supplies provided by franchisor
Disadvantages of Franchise
Poor management of a franchise can lead to bad reputation of whole business
Unable to make decisions to suit the local area
