CIE IGCSE Business Chapter 4

Business Chapter 4
Study online at https://quizlet.com/_e8rdnn
Sole trader A business owned by one person

Means that the liability of shareholders in
a
Limited liability
company is limited to only the amount
they invested
Means that the owners of a business can
be held
responsible for the debts of the business
Unlimited liability
they own. Their liability is
not limited to the investment they made
in the business
A form of business in which two or more
Partnership people agree
to jointly own a business
The written and legal agreement
between business partners. It is not es-
Partnership agreement sential for partners to have
such an agreement but it is always rec-
ommended
One that does not have a separate
legal identity. Sole traders and partner-
Unincorporated business
ships are unincorporated
businesses
Companies that have separate legal
Incorporated businesses
status from their owners
The owners of a limited company. They
buy shares
Shareholders
which represent part-ownership of the
company
Businesses owned by shareholders
Private limited companies
but they cannot sell shares to the public
Businesses owned by shareholders
but they can sell shares to the public and
Public limited companies
their shares are tradeable
on the Stock Exchange
1/5
Business Chapter 4
A legal requirement for all

companies. Shareholders may attend
Annual General Meeting and vote on who they want to
be on the Board of Directors for the com-
ing year
Payments made to shareholders from
the profits (after
Dividends tax) of a company. They are the return to
shareholders for investing
in the company
A business based upon the use of the
brand names,
promotional logos and trading methods
A franchise of an existing successful
business. The franchisee buys the li-
cence to operate this business
from the franchisor
Where two or more businesses start a
Joint venture new project
together, sharing capital, risks and profits
A business in the public sector that is
Public corporation owned
and controlled by the state (government)
A social enterprise has social objectives
Social enterprise as well as an aim to make a profit to
reinvest back into the business.
Own boss
Easy to set up, few legal regulations
Benefits of sole traders Work incentive as all profits are kept
Close to costumers
Accounts not published
No one to discuss business matters with
Unlimited liability
Drawbacks of sole traders Unincorporated
Likely to remain small as there's little
capital for expansion
2/5
Business Chapter 4
More capital
Shared responsibilities
Benefits of partnerships
Risks shared, work incentive
Bigger range of skills
Unincorporated
Unlimited liability
Disagreement, consulting wastes time
Drawbacks of partnerships Shared profits
Government limitations on the number of
partners
Shared profits
Limited liability
Incorporated
Benefits of private limited companies Share capital
Owners in control
Continuity
Legal formalities
Slow selling of shares, as all sharehold-
ers have to agree before selling
Accounts are more disclosed than sole
Drawbacks of private limited companies
traders and partnerships
Shares aren't tradeable on Stock Ex-
change and can't be sold to the public,
slow expansion
Limited liability
Incorporated
Very large capital sums as shares can be
sold to public
Benefits of public limited companies Shares tradeable on Stock Exchange
High status to attract suppliers and
banks
Continuity
Rapid expansion
Legal formalities
Disclosure of accounts
Drawbacks of public limited companies
Divorce between ownership and control
Expensive to go public
3/5
Business Chapter 4
Expensive to sell shares to the public
Original owners lose control by selling
too many shares
To the franchisor:
- licence bought from franchisers
- faster expansion as the franchisee
funds their outlet
- management of outlet is franchisee's
responsibility
- franchisor decides all products to be
sold
Benefits of franchises
To the franchisee:
- lower risk of business failure as a
well-known product is sold
- franchisor pays for advertising
- all supplies and training obtained from
franchisor
- fewer decisions
- more likely to get a bank loan
- keeps profits from their outlet
To the franchisor
- poor management of 1 outlet could ruin
the brand reputation
- franchisee keeps outlet profits
To the franchisee
Drawbacks of franchises
- less independence
- unable to make decisions suited to the
local area
- licence fee and percentage of the annu-
al turnover (gross revenue) must be paid
to the franchisor
Joint capital invested
Risks shared
Benefits of joint ventures
Locals know the business
Management partners shared
4/5
Business Chapter 4
Profits shared
Drawbacks of joint ventures Disagreements
Different management styles
5/5

CIE IGCSE Business Chapter 4

Uploaded by

Copyright:

Available Formats

CIE IGCSE Business Chapter 4

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CIE IGCSE Business Chapter 4

Uploaded by

Copyright:

Available Formats

Business Chapter 4

Study online at https://quizlet.com/_e8rdnn

Sole trader A business owned by one person

A legal requirement for all

You might also like