Types of Businesses Flashcards
what are private sector organisations
most common type of business organisation. they are sole traders, partnerships, private limited companies, public limited companies, franchises and multinationals
what is a sole trader
a business run by one person. e.g hairdressers
what are the main objectives of a sole trader
to survive, make a profit and provide a high quality service
how are sole traders financed
personal savings, loans from bank/family friends or government grants
what are the advantages of sole traders
easy to set up
owner keeps all profits
owner makes all decisions
what are some disadvantages of sole traders?
no new ideas come to business
unlimited liability
owner takes on entire workload
what is a partnership
businesses set up and controlled by 2-20 people. generally small, but attracts professionals in their crafts like dentists or doctors.
how is a partnership set up
a deed of partnership must be written. it will outline the important things such as how much each partner will receive from profits
what are the main objectives of a partnership
make a profit, survive and provide a high quality service
how are partnerships financed
each partners savings, loans from banks/family or friends and government grants
what are the advantages of partnerships
partnerships can share workload and responsibility
increased capital
each partner brings their own skill and unique experience
what are the disadvantages of partnerships
partners can disagree on important decisions
profits must be divided amongst all partners
all partners have unlimited liability
what is a private limited company
a business divided up into shares, with each member owning a number of shares each. must have a minimum of 2 shareholders. managed by a board of directors.
how is a private limited company financed
inviting people to purchase shares, loans from bank, government grants
how is a private limited company set up
register company with registrar of companies and complete a memorandum of association and articles of association. both documents outline company details
what are the main objectives of a private limited company
profit maximisation
sales maximisation
obtaining increased market share
what are the advantages of private limited companies
shareholders have limited liability
more financed can be raised from shareholders
control of company cannot be lost to outsiders (must invite people to purchase shares)
what are the disadvantages of private limited companies
profits shared amongst all shareholders
very complicated to set up, as involves legal process
difficult to raise large amounts of finance, shares cannot be sold on stock market
what is a public limited company
similar to a private limited company, controlled by a board of directors and owned by shareholders
how is a public limited company set up
the same as private limited company, registered with registrar of companies and memorandum of association and articles of association
how are public limited companies financed
selling shares on the stock market, bank loans and government grants
what are the advantages of public limited companies
shareholders have limited liability
banks more likely to lend money as its less risk
more capital can be raised than private limited companies
what are the disadvantages of public limited companies
must publish annual accounts
can become too large to manage effectively
no control over who buys shares
what is a multinational
a business that operates in at least one country. multinationals have a HQ in one country, but have bases like manufacturing or assembly plants in other countries, known as host countries
what are the key features of a multinational
operations in several countries
distinct home base country
achieved a global brand
can dominate markets across many countries
greatly influence local economies
why would a PLC want to become a multinational
increased market share
cheaper labour and production
avoid or reduce tax
save costs of transport
what negatives do multinationals have to overcome when entering a host country
cultural variations must be overcome
high transport costs
can be difficult to control
what positives do multinationals bring to host countries
new jobs and income, increasing standard of living
country has greater access to products/services
improves levels of expertise of local workers
what negatives multinationals to host countries
jobs provided may be low skiles
dominance of large multinationals can close local businesses
multinationals can hold lots of power, may force host country to give into demands
what is a franchise
a business agreement that allows use of an established brand or business name to sell their products or services
what is a franchiser
the original brand that is selling a license to the brand
what is a franchisee
the business purchasing a license to the brand
what are the advantages for the franchiser
franchisers name becomes more known a business expands
low risk form of growth as franchisee invests majority of capital and work
income guaranteed as franchisee pays percentage of profits as royalties to franchiser
what are the disadvantages for the franchiser
reputation of whole franchisee can be damaged by one poor franchisee
only a share of profits made by franchisees are share with the franchiser
checks must be carried out regularly to ensure franchisee is keeping to franchise standards
what are the advantages for the franchisee
franchise is already known business with existing customer base
industry knowledge training provided by franchiser
franchisee benefits from national advertisements carried out by franchiser
what are the disadvantages for the franchisee
very little autonomy over decisions as franchiser decides on products, uniforms etc
royalties must be paid each year
initial start up costs high
what are the features of the central government
controlled by elected politicians, but has departments run by paid civil servants.
what are the main objectives of the central government
provide essential services
improve society
how is the central government financed
taxation - VAT, income and corporation tax
what are the features of the local government
more localised and controlled by the central government
what are the main objectives of the local government
meet local needs
provide a service
how is the local government financed
central governments budgets
council tax
business rates
what are the features of public corporations
controlled by a chairperson and a board of directors, assigned by the central government
what are the main objectives of public corportaions
provide a service
serve public interest
how are public corporations financed
grants from central government
selling merchandise
selling access to service (bbc selling tv license)
what are voluntary organisations
set up to bring people together with similar interests (scouts, girl guides). managed and organised by a committee of elected volunteers
how are voluntary organisations financed
grants, lottery, local authorities, charging fee to be part of organisation, fund raising activities
what are the main objectives of a voluntary organisation
to serve people in local communities
what are charities
formed to raise money for underprivileged people. not owned by anyone, run by trustees and have overall control of charity. trustees unpaid
how are charities financed
shops, donations, lottery money.
surplus after cost goes to the need
what is a social enterprise
run like a private sector business (sole trader, partnership etc). controlled by a board of directors/paid managers, employees paid
how are social enterprises financed
capital investment, bank loans, government grants
what are the advantages of social enterprises
some grants only available to social enterprises
attracts customers who appreciate the good causes they help
attracts good quality staff who want to help the cause
