Unit 1.2 Types of Business Entities Flashcards
What are private limited companies
it is a business owned by a shareholder with limited liability and whos shares are private and cannot be sold on the stock market but can be sold to family and friends
What are 4 features of private limited companies
- difficult to raise finance
- limited liability
- they vote on major decisions
- their shares can only be sold/bought privately
What is a public limited company
it is a incorporated business that allows the general public to buy and sell shares in the company via stock market ; all shareholders have limited liability
What are advantages and disadvantages of public limited companies
Pro:
- more sources of finance
- limited liability
Con:
- no control of who your shareholders are
- expensive to set up
what is a private sector?
a business that is owned and ran by private individuals rather than the government and who aim to earn profits
eg: sole tradders, partners, privately held comapnies
What is a public sector?
an organization that is run and owned by the government to provide essential services to the general public
eg: healthcare, education, emergency services
What is a sole trader?
an organization that is run by a single entrepreneur who is fully responsible and in control for the running of their business
What are advantages and disadvantage of sole traders
ADV:
1. Simple setup: quick and cost effective to establish
2. Full profit retention
3. Owner has full control for decision making
DISADV:
1. Unlimited liability: personal assets are at risk
2.High workload: they bear all responsibilities and risks
3.Limited financing: reliance on personal funds and difficulty accessing external funds
What is a partnership?
A business owned by 2 or more individuals who share responsibility for its operations, profit and liability.
- Can be up to 20 partners
What are advantages and disadvantages of partnerships?
ADV:
1. Increased Finance:
2. Specialization: diverse skills and shared responsibility
3. Shared Workload
DISADV:
1. Conflict: disagreements between partners = slower decision making
2. Profit sharing: earnings are divided
3. Unlimited liability: personal assets are at risk
What is a privately held company?
a business owned by a small group of shareholders with limited liability and who’s shares cannot be sold on the stock market
What are advantages and disadvantages of privately held company?
ADV:
1. shares cannot be sold or bought without agreement
2. limited liability: shareholders only risk losing their investments
3. increased finance: more capital is raised than sole tradders and partnership
DISADV:
1.Expensive to opperate
2. shares can only be sold to family and friends
3. Targeted takeover by larger companies
What is a public held company?
it is a joint stock business owned by shareholders. Shares are openly traded on the public stock exchange allowing the public to buy and sell shares without prior knowledge from shareholders.
What are advantages and disadvantages of publicly held company?
ADV:
1. can raise significant funds from selling shares on stock market
2. shareholders have limited liability
3. continuity of business despite major changes with shareholders
DISADV:
1. business must disclose financial accounts = lack of privacy
2. high administrative cost
3. rivalry threat of takeover bid
What is a silent/sleeping partner?
inactive owners of a partnership business, who provides additional capital without being involved in the actual running of the business
What is a social enterprise
it is a business that aims to make profits while also benefiting society or the environment, it reinvests profits into achieving the business’s social objectives.
