business structure study notes g11
TRANSCRIPT
Business Structure
Business Structure and Size of Business
YSL
SOLE TRADER
ADVANTAGES:
Complete control
Keeps all profit
DISADVANTAGES:
Unlimited Liability
Difficult to raise capital
PARTNERSHIP
ADVANTAGES:
Shared decision making
Partners specialize in different ….....areas of business
DISADVANTAGES:
Unlimited Liability
Shared profit
PRIVATE LIMITED
COMPANIESADVANTAGES:
Limited liability for shareholders
Separate legal personality
DISADVANTAGES:
The need for legal formalities
Limited source of capital
PUBLIC LIMITED COMPANIES
ADVANTAGES:
Limited liability for shareholders
Separate legal identity
DISADVANTAGES:
The need for legal formalities
Risk of takeover
FRANCHISE
ADVANTAGES:
Assistance from franchiser
Reduced failing risk
DISADVANTAGES:
License can be expensive
Share of profits has to be paid to …….franchiser
PUBLIC CORPORATIO
NSADVANTAGES:
Take into account social …….objectives
Financial support from …….government
DISADVANTAGES:
Inefficiency due to subsidy
Government intervention for …….political reasons
SMALL BUSINESS
ADVANTAGES:
Adapt quickly to changing …….consumer needs
Closer relation to customers and …….workers
DISADVANTAGES:
Limited access to finance
Few opportunity for economies …….of scale
LARGE BUSINESS
ADVANTAGES:
Economies of scale due to …….increased scale of operation
Access to source of finance
DISADVANTAGES:
Difficult to manage
Risk of diseconomies of scale
FAMILY BUSINESS
ADVANTAGES:
Knowledge continuity
Commitment
DISADVANTAGES:
Continuity problem
Informality
SUMMARY- Primary Sector : Engaged in
extraction of natural resources
- Secondary Sector : Engaged in manufacturing and production from natural resources
- Tertiary Sector : Engaged in providing services to consumers
- Public Sector : Organisations accountable to and controlled by central government
- Private Sector : Business controlled by individuals
- Mixed Economy : Resources are owned and controlled by public and private sector
- Free-Market Economy : Resources are owned largely by private sector
- Command Economy : Resources are owned and controlled by the state
- Sole Trader : One person provides the permanent finance and has full control of the business
- Partnership : Business formed by two or more people with shared capital and responsibility
SUMMARY- Limited Liability: the only
liability a shareholder has if the company fails is the amount invested in the company
- Private Limited Company: Business that is owned by shareholders often members of the family and sell shares to the general public
- Share: Certificate confirming part ownership of a company
- Shareholder: Individuals owning shares in a limited company
- Public Limited Company: a limited company with the legal right to sell shares to the general public
- Memorandum of Association: states the name of the company and the address of the head office.
- Articles of Association: this document covers the internal workings and control of the business
- Franchise: a business that uses the name, logo and trading systems of an existing successful business
SUMMARY- Joint Venture: two or more
businesses agree to work closely together on a particular project.
- Holding Company: a business organisation that owns and controls a number of separate businesses.
- Public Corporation: a business enterprise owned and controlled by the state – also known as nationalised industry.
SUMMARY- Revenue: total value of sales
made by a business in a given time period.
- Capital Employed: the total value of all long-term finance invested in the business
- Market Capitalisation: the total value of a company’s issued shares.
- Market Share: sales of the business as a proportion of total market sales.
- Internal Growth: expansion of a business by means of opening new branches, shops or factories (also known as organic growth).
Business Structure& Size of Business
Ashley Andyanto
SOLE TRADER ORGANISATIONS
Advantages:
Easy to set up.
Owner has complete control & keeps all profits.
Disadvantages
Unlimited liability
Lack of continuity
PARTNERSHIPS
Advantages:
Shared decision making
Additional capital can be injected into the business
Disadvantages:
Unlimited liability
Profits are shared
PRIVATE LIMITED COMPANIES
Advantages:
Limited liability
Able to raise capital from sales of shares to family, friends and employees
Disadvantages:
Can't sell shares to the general public
Legal formalities involved
PUBLIC LIMITED COMPANIES
Advantages:
Limited liability
Separate legal identity
Disadvantages:
Legal formalities involved
Risk of takeover
FRANCHISES
Advantages:
Fewer chances of new business failing
Advice and training offered
Disadvantages:
Share of profits / revenue has to be paid to franchiser
No choice of supplies or suppliers
PUBLIC CORPORATIONS
Advantages:
Managed with social objectives
Finance raised mainly from the government
Disadvantages:
Subsidies can also encourage inefficiencies
Inefficiency due to lack of strict profit targets
SMALL BUSINESSESAdvantages:
Can be managed & controlled by owners
Can adapt quickly to meet changing customer needs
Disadvantages:
Few opportunities for economies of scale
Limited access to sources of finance
LARGE BUSINESSESAdvantages:
Benefit from economies of scale
Access to different sources of finance
Disadvantages:
Difficult to manage
Slow decision-making and poor communication
FAMILY BUSINESSES
Advantages:
Strong commitment - to see business succeed
Continuity within the family
Disadvantages:
Often reluctant to change systems and procedures
May fail to be sustainable in the long term
KEY TERMSPrimary Sector - firms engaged in extraction of natural resources.
Secondary Sector - firms that manufacture and process products from natural resources.
Tertiary Sector - firms that provide services to consumers and other businesses.
Public Sector - organisations to and controlled by central or local government.
Private Sector - businesses owned and controlled by individuals or groups of individuals.
Mixed economy - resources are owned and controlled by both private & public sectors.
Free-market economy - resources are owned largely by the private sector.
Shareholder - a person or institution owning shares in a limited company.
Command economy - resources are owned, planned and controlled by the state.
Sole trader - business in which one person provides the permanent finance & has full control of the business.
Partnership - business formed by 2 or more people, with shared capital and responsibilities.
Limited liability - the only liability a shareholder has if the company fails is the amount invested in the company.
Private limited company - business that is owned by shareholders but cannot sell shares to the general public.
Share - a certificate confirming part ownership of a company and entitling the shareholder to dividends and certain shareholder rights.
Public limited company - a limited company with the legal right to sell shares to the general public.
Memorandum of Association - states the name of the company, the address of the head office .
Articles of Association - this document covers the internal workings and control of the business.
Franchise: a business that uses the name, logo and trading systems of an existing successful business.
Joint venture: two or more businesses agree to work closely together on a particular project and create a separate.
Holding company - a business organisation that owns and controls a number of separate businesses, but does not
Public corporation - a business enterprise owned and controlled by the state – also known as nationalised industry
Revenue: total value of sales made by a business in a given time period.
Capital employed: the total value of all long-term finance invested in the business
Market capitalisation: the total value of a company’s issued shares. Market share: sales of the business as a proportion of total market
sales.
Business Structure & Size of Business
Sherlin Wongso
Sole Trader Advantages:
1. Makes all the decision
2. No profit sharing
Disadvantages:
1. Unlimited liability
2. No continuity once owner dies
PartnershipAdvantages
1. More capital available
2. Someone to consult with when making decisions
Disadvantages
1. Profit sharing
2. May have disagreements with partner(s)
Private limited companies
Advantages:
1. Limited liability
2. Can sell shares to friends and family to raise capital
Disadvantages:
1. Cannot sell shares to the general public
2. Has to pay dividends to shareholder
Public limited company
Advantages:
1. Can sell shares to the general public to raise capital
2. Continuity
Disadvantages:
1. Accounts are published so everyone can see, including competitors
2. Risk of takeover
FranchiseAdvantages:
1. Inexpensive marketing fee because brand is already well known.
2. Doesn’t need to find suppliers as the products are supplied from the company.
Disadvantages:
1. Difficult to make alterations regarding business operations because rules and regulations are set.
2. Cut in profit to pay the franchisor.
Public Corporation
Advantages:
1. They base their decisions on the full costs and benefits involved.
2. Economies of scale
Disadvantages:
1. May be difficult to manage and control
Small businessesAdvantages:
1. Easy to run and control
2. Adapts quickly to customer’s change in demand
Disadvantages:
1. Limited source of finance
2. Few opportunities for economies of scale
Large businesses
Advantages:
1. Opportunity for economies of scale
2. Access to various sources of finance
Disadvantages:
1. Difficult to manage (a long chain of command)
2. May experience diseconomies of scale
Family business
Advantages: 1. Allows family
members to bond 2. Continuity
Disadvantages: 1. Traditional2. Informality
Key terms Primary Sector - firms engaged in
extraction of natural resources.
Secondary Sector - firms that manufacture and process products from natural resources.
Tertiary Sector - firms that provide services to consumers and other businesses.
Public Sector - organisations to and controlled by central or local government.
● Private Sector - businesses owned and controlled by individuals or groups of individuals.
Mixed economy - resources are owned and controlled by both private & public sectors.
Free-market economy - resources are owned largely by the private sector.
Shareholder - a person or institution owning shares in a limited company.
Key terms Command economy - resources are
owned, planned and controlled by the state.
Sole trader - business in which one person provides the permanent finance & has full control of the business.
Partnership - business formed by 2 or more people, with shared capital and responsibilities.
Limited liability - the only liability a shareholder has if the company fails is the amount invested in the company.
Private limited company - business that is owned by shareholders but cannot sell shares to the general public.
Share - a certificate confirming part ownership of a company and entitling the shareholder to dividends and certain shareholder rights.
Public limited company - a limited company with the legal right to sell shares to the general public.
Key terms Memorandum of Association - states
the name of the company, the address of the head office .
Articles of Association - this document covers the internal workings and control of the business.
Franchise: a business that uses the name, logo and trading systems of an existing successful business.
Joint venture: two or more businesses agree to work closely together on a particular project and create a separate.
Holding company - a business organisation that owns and controls a number of separate businesses, but does not
Public corporation - a business enterprise owned and controlled by the state – also known as nationalised industry
Key terms Revenue: total value of sales made by
a business in a given time period.Capital employed: the total value of
all long-term finance invested in the business
● Market capitalisation: the total value of a company’s issued shares.
Market share: sales of the business as a proportion of total market sales.
Business Structure