types of businesses Flashcards
- Simplest and cheapest to establish.
- Owner has control over decisions.
- Owner keeps all profits
- Fewer government reporting requirements
Sole Trader Advantages
- Limited liability
- Can raise lots of money through shareholders
- Unlimited life - change in shareholders doesn’t cease business
- Run by board of directors not the shareholders.
Company Advantages
- Simple and inexpensive to set up
- Partners bring more money and skills
- Share of loses
Partnership Advantages
Unlimited Liability - the owner is personally responsible for business debts. Their personal assets may need to be sold to meet outstanding business debts.
Sole Trader
- Minimum of 5 shareholders needed
- Little to no profit distributed to members
- Only one vote each member
- Ongoing education for members
Cooperative Disadvantages
Limited Liability - shareholders are limited to the value of their shares for any business debts. No personal assets can be sold.
Company
A business which has separate legal entity from its shareholders. A proprietary (private) company has 1-50.
Company
- Franchisor controls decisions and operations
- paying ongoing fees to the franchisor
- Profit must be shared with franchisor.
Franchise Disadvantages
A business owned and operated by 1 person.
Sole Trader
- Unlimited liability
- Owner suffers all loses
- Difficult to take holidays or leave
Sole Trader Disadvantages
Limited Liability - members are limited to the value of their investment for business debts
Cooperative
A business owned and operated by 2-20 partners.
Partnership
Liability - Depends on if the franchise is set up as a sole Trader, partnership or company.
Franchise
Unlimited liability - the partners are jointly responsible for business debts. Their personal assets may need to be sold to meet outstanding business debts.
Partnership
- Established reputation, products or store layout
- Advertising and marketing support
- Franchisor provides training
Franchise Advantages
