Understanding Business Flashcards
Private Limited Company (LTD)
Owned by a minimum of one shareholder who are family or friends.
Directors or a Board of Directors make the decisions(run it)
Advantages of an LTD
Shareholders have limited liability
Easier to raise finance
No limit to number of shareholders
control of the new company is not lost.
Disadvantages of an LTD
set up costs are expensive and time consuming
Accounts have to be published
profits are shared out amongst a larger amount of
people
meet the requirements of the companies act
Public limited company (PLC)
Owned by a minimum of 2 shareholders with capital of £50 000
Decisions are made by the Board of Directors(run the org).
Advantages of a PLC
shareholders have limited liability
can raise vast amounts of finance
PLC’s dominate the market
shares can be sold on the stock market.
Disadvantages of a PLC
set up costs are high
Prospects uses have been produced
must abide by companies act
must publish annual accounts
What is a franchise
an agreement where a business sells the right to other business allowing them to sell the products or use the company name.
the difference between franchisor and franchisee
Franchisee - the person buying the rights
Franchisor - the company selling the rights.
Franchiser advantages
allows market share to increase without much effort.
finance for business is provided by franchisee
risks are shared between franchisee and franchiser
% of profits are achieved.
Franshier disadvantage
image and reputation depends on the franchise.
Franchisee advantages
franchiser will advertise nationally
franchiser carries out administration and training
begin trading with established name
customers are familiar with products
Franchisee disadvantages
all % of profits. has to be paid to the franchise
the franchiser has the power to withdraw the contract
strict rules may be set by franchiser and they may pose restrictions.
Multinational
a company that owns production/service facilities outside the country in which it is based - not if it imports/exports.
Benefits for Multinational
can allow orgs to increase their sales/profits
employ cheaper staff - greater profitability
take advantage of economies of scale and reduce unit costs of product.
orgs will become larger which may result in them being safer from takeovers
Costs of multinational
Legislation may be different in other countries which may require the organisation to alter its product/service
cultural difference will mean that organisations have to be sensitive to different cultures
different languages will exist and this may mean that the org have to employ specialist linguists to work with the organisations
