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CHAP4: Types of business organisation, sole trader is when a business is…
CHAP4: Types of business organisation
AGM: a legal requirement for all companies. Shareholders may attend and vote on who they want to be on the Board of Directors for the coming year
Dividends: Are payments made to shareholders from profit (after tax) of the company.
Public limited company:Are businesses owned by the shareholders but they can sell shares to the public.
Advantages:
limited liability
separate legal identity
no limit tp the number of shareholders
no restriction on buying, selling or transfer of share
Disadvantages:
legal formalities are complicated
More regulations and controls over
Selling shares to the public is expensive
May lose control
selling share price is expensive
Private limited companies
Advantages
Limited liability
Continuity
Separate legal identity
Raise capital form sale of shares
Disadvantages:
Cannot sell shares to public
Legal formalities
Accounts are available for public to see
Not easy to transfer shares
Franchise: When a business use the brand names, promotional logos, trading methods of existing successful business. Franchisee buys license form franchisor
Franchisor
DISADV
Franchisee keeps all profits
Poor management can lead to poor reputation for the whole business
ADV
Franchisee buys a licence form the franchisor
Expansion of the business is fast
The management of the outlets is the responsibility of the franchisee
All products sold must be obtained form the franchisor
Franchisee
ADV
Less chance to fail
The franchisor pays for advertising
Training for staff and managements is provided by the franchisor
Fewer decision to make
Bank are willing to lend loans
DISADV
Less independent
Licence fee must be paid
Joint venture is when two business join together to start a new project
ADV
Risk are shared
Cost are shared
Local knowledge cam be obtained
DISADV
Profit are shared
Disagreements between businesses
The Article of Association: Contain the rules under which the company will be managed - the rights and duties of all directors, rules concerning the election of directors and the holding of official meetings, and the procedure to be followed for the issuing of shares
The Memorandum of Association: contains every important information about the company and directors.
sole trader
Advantage
can make decision on thier own
just a few legal regulations to worry
can choose thier holiday, hours of work
do not have to share profits
Disadvantage
do not have benefit of limited liability
have no one to discuss about business matter
sources of finance are limited
likely to remain small
no one to who will take control when ill
partnership:is a group of people join and own the business together
advantage
responsibilities of running the business are now share
more capital could now be invested
partners can specialise
More ideas from partners
disadvantage
do not have seperate legal identity
do not have limited liability
partners can disagree about something and cause conflict
No continuity
Public corporation:: Public sector businesses own by government
ADV
The industries are considered to important
Government can help nationalise it
DISADV
No private shareholders
No close competitiion
government can use businesses for political reasons
sole trader is when a business is owned by one person