topic 1.2 types of organisations

What is a sole trader?

A business owned and run by one person who has unlimited liability for business debts

What is a partnership?

A business owned by two or more people (usually between 2-20 partners) who share the profits and have unlimited liability.

What is a private limited company (Ltd)?

A company with limited liability where shares are NOT traded on the stock exchange. Ownership is limited to family/friends.

What is a public limited company (PLC)?

A company with limited liability where shares CAN be traded on the stock exchange to the general public.

What is a public corporation?

A business owned by the government (e.g., state-owned enterprises).

What is limited liability?

When shareholders are only responsible for business debts up to the amount they have invested. Personal assets are protected

What is unlimited liability?

When business owners are personally responsible for all business debts. Personal assets can be used to pay business debts.

What is a franchise?

A business where the owner (franchisor) sells the right to use their business name and system to another person (franchisee).

What is a social enterprise?

A business that has social or environmental objectives as its primary goal, rather than maximising profit.

What is a multinational company?

A business that has operations in more than one country.

In a sole trader, the owner has ____________________ liability, meaning they are personally responsible for all business debts.

Unlimited

Shareholders in a limited company have ____________________ liability, meaning they only lose what they invested.

Limited

A ____________________ is a business owned by the government.

Public corporation

A ____________________ sells the right to use their business name and system to another person.

Franchisor

Define "unlimited liability."

When business owners are personally responsible for all business debts. Their personal assets can be used to pay business debts.

What are the reasons for and against public ownership?

Reasons for:

• Provides essential services

• Prevents private monopolies

• Government can invest in industries

Reasons against:

• May be less efficient due to lack of competition

• May be subject to political interference

• May not respond to consumer needs

What are the benefits of a franchise for the franchisor?

• Fast expansion with little capital

• Income from franchise fees and royalties

• Franchisee manages day-to-day operations

What are the benefits of a franchise for the franchisee?

• Uses an established brand name

• Benefit from proven business systems

• Training and support provided

• Reduced risk compared to starting from scratch