Types Of Businesses (NEED) Flashcards
Describe the public sector
Business is run by government,
provides most public goods, usually not profit pretended,
employees are greater portion of the labour force and raises funds through taxation, borrowing, issuing government securities and more.
Describe the private sector
Driven by the profit motive which may be reflected by the prices, raises funds by borrowing or issuing shares and loans and businesses owned and operated by private individuals
What is a sole trader?
A personal who owns his or her business
What are characteristics of a sole trader business?
Easy to set up, financed by owners, bears all risks and keeps all profits, provides a personal service and has no one to account to
What are advantages of a sole trader business?
Easily and quickly formed and dissolved, close relationship with customers, decisions can be made quicker, takes all profits and pays lower personal tax not company tax
What are disadvantages of a sole trader business?
Limited capital and it is not easy to get loans, long working hours, business usually dissolves if owner dies and lack of specialized staff
How are sole trader business formed?
No legal formalities needed except sometimes a special license. Usually required to register their trade name
How is a sole trader business managed?
Usually the sole trader and in some cases a few employees
What is a partnership?
An association between 2-20 people operating a business.
What are the two types of partnerships?
Ordinary partnerships where everything is shared equally and limited partnerships.
What are disadvantages of a partnership?
Unlimited liability, personalities of partners might cause difficulties in decision making, some difficulty in raising capital, with no agreement all profits must be shared equally.
How is a partnership formed?
A partnership deed is usually written up to form the arrangement
How is a partnership managed
By the ordinary partners
What are the advantages of a partnership?
Easy to set up, business doesn’t end if one partner dies, shared workload, pays Lower personal tax not company tax, more capital obtained than sole trader.
What is a Co-operative?
Businesses that are formed, owned and operated by its members.
What are the characteristics of a cooperative?
All members have a vote,
limited interest on money invested,
the members are the clients,
members usually have a common bond
and profits distributed among members.
What are types of cooperatives?
Financial co-ops, consumer co-ops and agricultural co-ops.
What are advantages of cooperatives?
There is a market for members, employment is provided, owned and operated by its members, all profits shared among members and shared decision making.
What are the disadvantages of cooperatives?
Poor inexperienced and unqualified management, conflict among members can lead to slow decision making and unable to attract skilled professionals
How are cooperatives formed?
Each member purchases shares to form the capital base of the cooperative
How are cooperatives managed?
By the membership through a management board elected by members
What is a company?
A legal business entity which has been incorporated and is separate from its owner(s)
What are two types of companies?
Private limited companies and Public Limited companies. Ltd and PLC
What is a private limited company?
A company where 2-50 shareholders form a company
What are characteristics of a private limited company?
Limited liability, a separate legal entity, governed by memorandum or articles of association, proper accounts must be kept for tax purposes, 2-50 shareholders and they tend to be owned by families and close friends
What are advantages of a private limited company
The company is separate from owners, shareholders have limited liability up to the amount they invested, easy access to loans, privacy and larger capital base than sole traders or partnerships.
What are the disadvantages of a private limited company?
Shares aren’t traded publicly
and therefore capital base will be limited, skills may be limited,
shares are not transferable without the directors consent
How are private limited company’s formed
Certain legal requirements are needed such as a memorandum or articles of association or a statement of authorized registered or nominal capital
How are private limited companies managed
The owners manage the business or hire specialized personnel
What are public limited companies?
An incorporated company which offer shares to the public
What are characteristics of public limited companies?
Limited liability,
separate entity,
governed by a memorandum and articles of association and prospectus,
directors elected at AGM,
proper accounts must be kept for tax purposes
and shares are sold to members of the public.
What are advantages of a public limited company?
Separate from owners, shareholders have limited liability up to the amount invested, easy to access loans, risk is spread amount shareholders, easy transfer of shares and specialists are hired to run the firm
What are disadvantages of a public limited company?
Objectives of managers may differ from owners/shareholders, workers are not part of decision making and accounts must be submitted for inspection
How is a public limited company formed?
Certain legal requirements are needed such as memorandum or articles of association,
statement of authorized registered or nominal capital and prospectus.
How is a public limited company managed?
By a board of directors
What is a franchise?
A right which is bought by a franchisees from the franchiser to sell goods using the franchisers name.
