Flashcards
3.1.2: Understanding different business forms
Cards in this deck (15)
- 15 Legal structures: (Business forms)1) Sole trader
2) Partnership
3) Private Limited Company
4) Public Limited Company
5) Not For Profit (NFP) Organisation - 2Capital:amount of money available to a company
- 3Unlimited Liability:owner is responsible for covering debts of a business (risk of personal assets being seized as cover as owner and business exist as one legal entity)
- 4Limited Liability:responsible for debts of the business that won't exceed the amount invested into the company (owner(s) and business exist as a separate legal entity)
- 5Sole Trader: (e.g. plumbers, hair dressers, newsagents, photographers) *PROFITKey characteristics:
- Unlimited liability
-Self employed (one owner)
-should be short term
Benefits:
-Small & easy to set up
-Full control and easier as only owner
-You keep profits
-Small amount of start up capital required, reducing costs
Drawbacks:
-long hours with minimal time off
-no split responsibility
-development limited by capital available
-Difficulty in gaining finance
-unlimited liability
Change?:
-Partnership -> access to more skills/experience and finance
-Ltd (Pros) -> more credible, greater access to finance, limited liability
(Cons) -> loss of ownership/control, costly, time consuming - 6Partnership: (e.g. Ben & Jerry, Google co-founders, Hewlet-Packard (HP)) *started off as* *PROFITKey Characteristics:
-2 or more owners
-unlimited liability
-should be short term
Benefits:
-more capital available
-shared responsibility and skills
Drawbacks:
-loss of ownership/control
-unlimited liability
Change?:
-Ltd (Pros) -> more credible, greater access to finance, limited liability
(Cons) -> loss of ownership/control, costly, time consuming - 7Private Limited Company: (e.g. John Lewis, New Look, Clark's) *PROFIT & SUCCESSKey Characteristics:
-small-medium sized business
-owned by a small group of people/family
has 'Ltd' after name
-limited liability (separate legal entity)
-shareholders must be in agreement before selling shares
-should be short term
Benefits:
-greater capital available
-greater access to finance
-limited liability
Drawbacks:
-Private shares
-limited growth due to 50 shareholder maximum
-greater responsibility
Change?:
-Plc (Pros) -> greater access to finance and public trading of shares for more capital, higher status
(Cons) -> loss of control/ownership, dividend payments to shareholders (increase costs) - 8Public Limited Company: (e.g. McDonald's, Starbucks, Blackberry)] *MAINTENANCE OF SHARE PRICEKey Characteristics:
-limited liability
-must have £50,000 in capital at least
-shares traded publicly via stock exchange
has 'Plc' after name
-should be long term
Benefits:
-greater shareholder options
-limited liability
-can raise large capital
Drawbacks:
-management problems due to size
-Lots of legal formalities
-loss of control/ownership (hostel takeover)
-dividend payments - 9Dividend:a sum of money paid by a company to its shareholders out of its profits
- 10Not For Profit (NFP) Organisations: (e.g. charities) *SUCCESSFUL WITHOUT TAKING PROFITSKey Characteristics:
-limited liability
-established for particular reason/aim
-profits reimbursed into company
-short/long term depending on success
Benefits:
-limited liability
-no taxes
-beneficial to community
Drawbacks:
-scrutiny from public
-no profit
-high initial start up costs
-paper work
-shared control - 11Shareholders:The owners of shares to a Plc or Ltd company . (own a part of the business)
- 12Share Price:The current market value of a share
- 13Changes of Share Price:* Supply increases (becomes more abundant), price decreases
*Demand increases (becomes more desirable), price rises
Visa versa - 14Private Sector Organisations:Companies owned and ran by any private individuals e.g. Tesco, Sainsburys
*Main Objective: maximise sales and profits - 15Public Sector Organisations:companies owned and ran by the governement e.g. NHS
*main objective: provide a service to the general public
Information
- Description
- Legal structures/business forms, shareholders, share price, private/public sector organisations
- Created by
- Ashleigh-Jade Jones
- Views
- 54
- Rating