Understanding business forms Flashcards
What is a sole trader
1 owner in a business
Advantages of a sole trader
+ remain full control
+ retain all earnings
Disadvantages of a sole trader
- pressure / workload
- unlimited liability
What is a public limited company
Sell shares on the stock exchange
Advantages of being a public limited company
+ able to raise large amounts of share capital
+ limited liability
Disadvantages of being a sole trader
- risk of competitors buying shares
- high costs (corporation tax)
What is a private limited company
Don’t sell shares on the stock exchange
Advantages of being a private limited company
+ no risk of competitors buying shares
+ limited liability
Disadvantages of being a private limited company
- not able to raise large amounts of share capital
- high costs (corporation tax)
Definition : market capitalisation
The market value of the business in terms of shares
Calculate : market capitalisation
Market price of shares x number of outstanding shares
Difference between the public and private sector
Public - government funded
Private - individually funded
What is a non profit organisation
Their sole aim is to make the world a better place e.g. charities
What is a social enterprise
A business set up to provide for the community / improve quality of life
What is ordinary share capital
Cash raised from selling shares in the company
What is a shareholder
They buy shares from the business in return for dividends and responsibility in the decision making process
Factors that influence the form of a business
- financial needs
- business size
- liability
- degree of control
Influences on share price
- business performance
- consumer income
- competitors
- the economy
- new products launched
- market conditions
