Types of Businesses Flashcards
The partners are jointly responsible for business debts their personal assets may need to be sold to meet outstanding business debts
Partnership
- Expensive to set up and operate
- Complex reporting requirements
company disadvantages
Minimum of 5 shareholders
- little to no profit distributed to members
- Only one vote each member
- Ongoing education for members
Cooperative disadvantages
- simple and inexpensive to set up
- Partners bring more money and skill
- Share of losses
Partnership advantages
Shareholders are limited to the value of their shares for any business debts. No assets can be sold.
Company
A business or person buys the right to use the name, product and services of an existing business
Franchise
- Unlimited liability
- owner suffers all losses
- Difficult to take leave or holidays
Sole trader disadvantages
- Established reputation, products or service and store layout
- Advertising and marketing support
- Franchisor provides training
Franchise advantages
A business owned and operated by 2 - 20 people.
Partnership
Members are limited to the value of their investment for business debts
Cooperative
A business which has at least 5 members with shared managements and equal voting rights. it has a separate legal entity.
Cooperative
- simplest and cheapest to establish
- Owner has control over all decisions
- Owner keeps all profit.
- fewer government reporting requirements
Sole trader advantages
Depends on if the franchise is set up as a sole trader, partnership or company
Franchise
A business owned and operated by 1 person
Sole trader
A business which has a separate legal entity from its shareholders.
company
- limited liability
- can raise lots of money through shareholders
- Unlimited life - change in shareholder does not cease business
- Run by board of directors not shareholders
Company advantages
The owner is personally responsible for business debts. Their personal assets may need to be sold to meet outstanding business debts
Sole trader
- Unlimited liability
- profits must be shared
- Disputes between partners
- Ceases if a partner dies, leaves, or retires
Partnership Disadvantages
- Franchisor controls decisions and operations
- paying ongoing fees to the franchisor
- Profit must be shared with franchisor
Franchise Disadvantages
- Inexpensive to register
- Equal voting rights
- Limited liability
- No minimum age limit of members
Cooperative Advantages
