Types of Businesses Flashcards
What are the four types of businesses?
sole proprietorship
partnership
private limited company
public limited company
Another name for sole proprietorship?
sole trader
Who is a sole trader?
a person who has total ownership and responsibility for his/her own business.
examples of sole traders?
plumbers. electricians, gardeners, photographers & hairdressers
Characteristics of a sole proprietorship business?
1) It is owned and managed by one person (in most cases)
2) it is easy and inexpensive to form
3) He / She manages the business but may have the services of family or friends
4) it is usually financed by the owner
The sale of alcohol requires a spirit license from the ?
local magistrate
The sale of food items requires a license from the?
local food health authority
The requirement of a special license to sell certain items, in Jamaica is called?
The Bureau of Standards
Advantages of being a sole trader?
They receive all the profits earned by the business
Decisions can be made in a short period of time
Starting and operating of the business can be done easily
There is no need to disclose business affairs except to tax authorities or creditors when seeking loans. (secrecy)
Many persons find personal satisfaction working for themselves (independence)
Give an example of a creditor
a financial institution
Disadvantages of being a sole trader?
The owner may find it difficult in getting financial support if expansion of the business is necessary.
The owners may have to work long hours
The business may not continue if the owner dies
The owner may not be in a position to hire specialized task (lack of specialized staff)
What is a partnership?
the association of 2 to 20 persons legally operating a business for the common goal of making a profit.
Characteristics of a partnership?
the minimum is 2 and the maximum amount of persons is 2o members except in the case of banking where the maximum is 10 members
profits are shared equally or as stated in the partnership deed
capital is provided by the partners as agreed
the retirement or death of one partner may require the reorganization of the partnership
When a number of persons want to form a partnership, a written agreement should be drawn up. This agreement is called…?
a Partnership Deed/Article of Partnership
A partnership has __________ liability. (unlimited, limited)
unlimited
What is the Partnership Deed/Article of Partnership?
This sets out in writing the terms of the partnership.
In absence of a Partnership deed, what is enforced?
the Partnership Act
Name 4 types of partners
General/Ordinary/Active
Sleeping, Dormant, Docile/Silent
Unlimited
Limited
Who are General/Ordinary/Active Partners?
partners who are actively involved in the day-to-day operations of a business
Who are Sleeping/Dormant/Docile/Silent Partners?
partners who invest money in the business but do not take an active role in it.
Who are Unlimited Partners?
Partners who have unlimited liability status, meaning, this means that if the business becomes bankrupt they are not protected so they will lose their personal assets as well as what they have invested in the business.
Who are limited partners?
Partners who are protected, meaning if the business goes bankrupt they will lose only what they have invested in the business.
What are the benefits of being in a partnership?
- the work load is shared
- the risks are shared
- knowledge and skills are shared
- there is a greater access of finance
What are the disadvantages of being in a partnership?
- decision making is slow
- you are responsible for any mistakes made under any other partner
-there is unlimited liability in a partnership
Define company
a group of companions who come together to set up a business
What are the two types of companies?
private and public limited companies
What is the main difference between private and public limited companies?
where they receive their finances
Define public companies
companies whose shares are traded on a public stock exchange. They can trade shares without having to get permission from the board of directors
Define private companies
companies that are owned by private shareholders and whose shares are not openly traded on a stock exchange.
In a private limited company financial support comes from?
family members/ personal savings
In a public limited company financial support comes from?
the general public/loans from financial institutions
In which type of company is there limited liability and so Ltd is included in the company name?
private company
how many shareholders are there in a private company
2-50
how many shareholders are there in a public company
a minimum of seven
which type of company is considered a legal entity?
(an individual, company, or organization that has legal rights and obligations.)
Private
advantages of having a private limited company
profits are retained by owners
greater access to capital
greater level of continuity
original owners can stop outsiders from buying up their copmpany
Disadvantages of having a private limited company
shares cannot be issued to members of the public
liability
shares are not easily transferred without the consent of the directors
financial statements are audited by the registrar of the company
decision-making can be slow
having a smaller number of people from whom to draw funds may restrict growth
advantages of having a public limited company
all share holders have limited liability
greater access to capital
shares are transferrable
an incorporated business is easier to sell than an unincorporated one
disadvantages of having a public limited company
Financial statements are audited and published
the business may get too large causing diseconomies of scale
decision making can be slow
a huge amount of administration is needed to register the company and to produce annual reports
detailed accounts must be kept
advantages of having a sole trader business
you get all the profit from the business
the business needs less capital
financial independence
disadvantages of having a sole trader business
hard to get loans
you have to provide all the capital on your own
if the business goes bankrupt you are responsible for all the losses
Examples of public limited companies?
Grace Kennedy
NCB
Berger Paints
JMMB
Supreme Ventures
Examples of private limited companies
plumber
hair salon
dental practice
accountant
restaurant
What are the two legal documents needed to open a business?
Memorandum of association
Articles of association
What is the memorandum of association?
it defines the relationship of a limited liability company with its shareholders
Four things included in a memorandum of association?
company’s name
physical address of the registered office
names of shareholders
distribution of shares
What is the articles of association
it specifies the regulations for a company’s operations and defines the company’s purpose.
What is stock exchange?
a marketplace where stocks and bonds are usually bought and sold
How are bonds and corporate bonds usually traded?
bonds- over the counter
corporate bonds- stock exchange
Who are shareholders?
a person, company or institution that owns at least one share of a company’s stock.
