Types of Businesses Flashcards
A businesses owned and operated by 1 person.
Sole Trader.
The owner is personally responsible for business debats. Their personal assets may need to be sold to meet outstanding businesses dabts
Sole Trader.
Simplest and cheapest to establish .
Owner has control over all decisions. Owner keeps all profit.
Fewer government reporting requirements.
Sole Trader Advantages.
Unlimited liability.
Owner suffers all losses.
Difficult to take holidays or leave.
Sole Trader Disadvantages.
A business owned and operated by 2 to 20 partners
Partnership.
The partners are jointly responsible for business debts. Their personal assets may need to be sold to meet outstanding business debts.
Partnership
Simple and inexpensive to set up.
Partners bring more money and skills.
Share of losses.
Partnership Advantages
Unlimited liability. Profits must be shared. Disputes between partners. Ceases if a partner dies, leaves or retires.
Partnership Disadvantages.
A business which has a separate legal entity from its shareholders. A public company has a minnimum of 1 shareholder. A Proprietary (private) companies range from 1 to 50.
Company Description
Limited liability-shareholders are limited to the value of their shares for any business debts. No personal assets can be sold.
Company
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
Expensive to set up and operate
Complex reporting requirements
Company Disadvantages
A business or person buys the right to use the name, products and services of an existing business .
Franchise Description
Depends on if the franchise is set up as a sole trader, partnership or company.
Franchise
Established reputation, products or service, and store layout.
Advertising and marketing support.
Franchisor provides training
Franchise Advantages
Franchisor controls decisions and operations
Paying ongoing fees to the franchisor.
Profit must be shared with franchisor
Franchise Disadvantages
A business which has at least 5 members
with shared management and equal voting rights. It is a separate legal entity.
Cooperative Description
Members are limited to the value of their investment for business debts.
Cooperative
Inexpensive to register
Equal voting rights
Limited liability
No minimum age limit of members
Cooperative Advantages
Minimum of 5 shareholders needed
Little to no profit distributed to members
Only one vote each member
Ongoing education for members
Cooperative Disadvantages
