Unit 1: Chapter 4 Flashcards
What is a sole trader?
an unincorporated business owned by one person. in this business the owner is the sole proprietor and has unlimited liability.
What are the advantages of a sole trader?
full control of the business and have a higher percentage of profits
What are the disadvantages of a sole trader?
they have unlimited liability and no outside input
What is unlimited liability?
when the owners of the business can be held responsible for all debts from the business. their liability is not limited to the investments made in the business.
What is limited liability?
the liability of shareholders in a company is limited only to the amount invested in the business.
What is a partnership?
a form of business in which two or more people agree to jointly own a business
What are the advantages of a partnership?
have someone to discuss ideas with, not liable for everything (debts are shared)
What are the disadvantages of a partnership?
unlimited liability, disagreement with partners, shared control
What is a private limited company?
businesses owned by shareholders but they cannot sell shares to the public
What are the advantages of private limited companies?
shares can be sold to large number of people which can help the business expand rapidly, limited liability, founds of company can maintain control
What are the disadvantages of private limited companies?
many legal documents needed to prepare, shares cannot be sold without consent of all shareholders, shares can’t be sold to public, dividends expected
What is continuity?
after the owner dies the business still goes on and is passed to some else. (family, friends, employee etc.)
What are dividends?
payments made to shareholders form the profits as a reward for investing in the company.
What is an incorporated business?
companies that have separate legal status from their owners.
What is an unincorporated business?
business and the owner don’t have separate legal entities, they are the same which is why they have unlimited liability.
What are public limited companies?
businesses owned by shareholders but they can sell shares to the public and their shares are tradeable on the stock exchange.
What are the advantages of public limited companies?
limited liability, no limit to number of shareholders, no restriction in buying/selling/transfer of shares, high status attracting investors and suppliers
What are the disadvantages of public limited companies?
complicated/time consuming legal regulations, public accounts visible to public at all times, owners may lose control of business if too many shares sold
What is a franchise?
a business that is based upon the use of brand names, promotional logos and trading methods of an existing successful business. the franchise buys the license to operate this business from the franchisor someplace else.
What are the advantages of franchises?
company can expand internationally, brand is already successful, responsibility of management is spread out
What are the disadvantages of franchises?
lack of control, poor management can lead to a bad reputation for the business, franchisee keeps profits from the outletW
What is a joint venture?
when 2 companies partner together to create a new company.
What are the advantages of a joint venture?
using other countries knowledge and brand awareness to build your new company allows you to reach a larger audience, splitting workload
What are the disadvantages of joint ventures?
other companies may not be reliable and may ruin your brand image
What is the difference between a business and a company?
a company is a business you can buy shares from. a business is any type of corporation that combine the factors of production to satisfy peoples needs and wants. a company is a type of business, however a business is not a company
What is a public corporation?
an organisation owned by the government
What are the advantages of public corporations?
services can be given to the local population for free/low prices compared to businesses in the private sector, fiscal policy will also decrease unemployment and increase GDP
What are the disadvantages of public corporations?
not as profit driven but instead to public service.
What is a social enterprise?
a business that has social objectives but still tries to make a profit
