Unit 1.2-Types of business entities Flashcards
What is the Private Sector?
Businesses owned and operated by private individuals or groups aiming to make a profit.
Examples include Apple, Tesla, and local shops.
What is the Public Sector?
Organizations owned and controlled by the government, usually providing essential services.
Examples include public hospitals, police, and public schools.
What is a Sole Trader?
A business owned and run by one person.
Example: A local bakery or a freelance graphic designer.
List three features of a Sole Trader.
- Full control over decisions
- Keeps all profits
- Unlimited liability (personally responsible for debts)
What are the advantages of being a Sole Trader?
- Easy and inexpensive to set up
- Full decision-making power
- Keeps all profits
What are the disadvantages of being a Sole Trader?
- Unlimited liability (personal assets at risk)
- Limited access to finance
- Heavy workload (one person does everything)
What is a Partnership?
A business owned by two or more people who share profits and responsibilities.
Example: A law firm or a dental clinic owned by multiple dentists.
List three features of a Partnership.
- Shared ownership and management
- Unlimited liability (unless it’s a limited partnership)
- Shared profits and responsibilities
What are the advantages of a Partnership?
- More access to finance than a sole trader
- Shared skills and expertise
- Workload is distributed
What are the disadvantages of a Partnership?
- Unlimited liability for general partners
- Profits must be shared
- Risk of conflicts between partners
What is a Privately Held Company (Private Limited Company - Ltd.)?
A company whose shares are privately owned and not sold on the stock exchange.
Example: IKEA, Dyson.
List three features of a Privately Held Company.
- Limited liability (owners’ personal assets are protected)
- Shares can only be sold with approval
- More legal requirements than sole traders/partnerships
What are the advantages of a Privately Held Company?
- Limited liability for owners
- Easier to raise capital than sole traders/partnerships
- Business continuity (not dependent on one owner)
What are the disadvantages of a Privately Held Company?
- More regulations and legal formalities
- Cannot sell shares to the public
- Profits shared among shareholders
What is a Publicly Held Company (Public Limited Company - PLC)?
A company that sells shares on the stock market, allowing anyone to buy shares.
Example: Apple, Amazon, Microsoft.
List three features of a Publicly Held Company.
- Limited liability for shareholders
- Can raise large amounts of capital by selling shares
- Required to publish financial reports
What are the advantages of a Publicly Held Company?
- Large capital from public investors
- Limited liability
- Business can continue even if owners change
What are the disadvantages of a Publicly Held Company?
- Risk of losing control (outsiders can buy shares)
- Expensive to set up and maintain
- Must publicly share financial information
Why is Limited Liability Important?
It protects the personal assets of business owners; shareholders only lose the money they invested if a company goes bankrupt.
What are For-Profit Social Enterprises?
Businesses that aim to make profits but also have a social or environmental mission.
What are the features of Private Sector Companies?
- Owned by private individuals
- Operate for profit but may focus on sustainability/social causes
Example: Tesla (profits + clean energy).
What characterizes Public Sector Companies?
Owned by the government but operates like a business.
Example: State-owned railway companies.
What is a Cooperative?
A member-owned business where profits are shared.
List three features of a Cooperative.
- Members own and run the business
- Decisions made democratically
- Profits shared among members
What are the advantages of a Cooperative?
- Fair profit-sharing among members
- Democratic decision-making
- Benefits the local community
What are the disadvantages of a Cooperative?
- Slower decision-making
- Limited profit potential
What are Non-Profit Social Enterprises?
Organizations that focus on social causes rather than making profits.
What are Non-Governmental Organizations (NGOs)?
Independent organizations that focus on humanitarian, environmental, or social issues.
Examples: Red Cross, Greenpeace, Oxfam.
