types of business organisations Flashcards
what is the meaning of a sole trades
a business that is owned by 1 person
advantages of a sole trader
close rs with customers
few legal requirements
freedom
secrecy
disadvantages of being a sole trader
no one to discuss business matters with
unlimited liability
limited ideas
what is the meaning of limited liabiliity
lability of shareholders are limited to the amount they invest in
what is the meaning of unlimited liability
owners of a business can be held responsible for debts of the business they own. their liability is not limited to the investment they made in the business
what is the meaning of a partnership
a business owned by 2 or more people
what is the meaning of partnership agreement
otherwise known as deed of partnership
a written and legal agreement between partners. not essential for partners to have it but recommended
what are the advantages of partnerships
they can focus on what they are best at
more motivated bc both benefits
more capital
disadvantages of having a partnership?
unlimited liability
differences in how to operate the business
business does not have separate legal identity
dishonesty
what is the meaning of unincorporated business
a business that does not have separat legal identity
explain the difference between partnerships and LLP
LLP has limited liability but shares cannot be bought or sold. limited partnerships also has a separate legal identity
what is the meaning of incorporated businesses
companies that have separate legal status from their owners
company can make contract or legal agreements
company accs are keeps separate from accounts of owners
what is the difference between a company and unincorporated business
a company has separate legal identity and is an incorporated business
what is the meaning of shareholders
owners of limited company. they buy shares which represent part ownership of the company
what is the meaning of private limited companies
business owned by shareholders but cannot sell shares to public
advantages of a private limited company
more capital
limited liability
disadvantages of private limited companies
complicated legal matters - the article of association and the memorandum of association
shares cannot be sold or transferred to anyone without agreement of other shareholders - cant sell shares quickly
accounts are less secret where they have to be sent to register of companies so public can inspect them
cant sell shares to public- cant raise large sums of capital
what is the articles of association
contains the rules under which the company will be managed such as the rights and duties of all directors
what is the memorandum of association
contains info abt company and directors; official name and address of offices
what is the meaning of public limited companies
business owned by shareholders but they can sell their shares to public and is tradable on the stoke exchange
advantages of public limited companies
limited liability
large capital
incorporated business
high status
disadvantages of public limited companies
long legal formalities
more regulations and controls
sell shares are expensive
owners may lose control
explain annual general meeting
legal requirement for all companies. shareholders may attend and vote on who they want to be on the board of directors for the coming years
what is dividends
payments made to shareholders from profits (after tax) of a company. they are the return to shareholders for investing in the company
explain the procedure of annual general meeting
shareholder attend AGM - vote for board of directors who take all important decisions - appoint managers for day to day business
explain the meaning of franchise
a business based upon the use of the brand names, promotional logos and trading method of existing successful business. franchisee buys the licence to operate this business from the franchisor
advantages to franchisor
faster expansion
management of outlet is responsibility of franchisee
all products must be obtained from the franchisor
disadvantages to franchisor
poor management of franchisee will give bad reputation
franchisee keeps profits
advantages to franchisee
chances of failure is reduces franchisor pays for advertising and training all supplies obtained by franchisor less decision made banks are willing to lend money
disadvantages to franchisee
less independence
might not make correct decisions for outlet
licence fee must be paid
explain joint venture
2 or more business start a new project tgt sharing risk capital and profits
what are the advantages of joint venture
sharing cost
less risk
local knowledge if company is based in country
disadvantages of joint venture
profits have to be shared
disagreements over important decisions
different wats of running a business
what is public corporations
business in a public sector that is owned and controlled by state or gov
advantages of public corporations
no competitors
secure jobs
important program made available to public
disadvantages of public corporations
not as much profit
inefficiency
may use for political reasons
