business structure study notes g11

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