Business in real world

What must happen in order to set up a company ?

The owners must complete a various range of documents and register the business at compnanies house. 

What does it mean if companies have limited liability ?

This means that if a company fails then the owners are responsible for the money they invested but nothing more than this. This results in the business being responsible for the money it owes but personal possessions are safe. 

What is limited liability?

Its in the result of financial difficulty personal posssesions of shareholders are safe

Why is limited liability important?

It encourages investment. People are more likely to invest if they know they wont lose more money that they put in. This helps raise capital and grow.

what are private limited companies ?

A company that has a seperate legal status from its owners and are owned by shareholders

ADVANTAGES OF PRIVATE LIMITED COMPANIES 

• Limited liabiloty 

• Access to greater finance from investors who consider limited companies less risky.

• Family members or close friends are only shareholders which reduces outsiders

DISADVANTAGES OF PRIVATE LIMITED COMPANIES

• More expensive and time consuming to set up due to legal advice being required 

  • shareholders may have limited control as the founder may have  their own agenda

What is a reason to stay as a private limited company and not PLC

Going public and sellling more shares means that their is more shareholders means that dividends are shared across more shareholders so a dilution of profits.

what is a PLC?

They are large companies which sell their shares on the stock exchange

How do u measure the size of a PLC?

market capitalisation which is the total value of issued shares of a PLC

benefits of PLC

Increased publicity. They are relatively large meaning being a PLC gives a business the opppurtunity to increase their brand image.

Increased capital. This is because they are able to selll shares freely via the stock exchange enabling them to raise large sums of capital so that they can fund for a range of activities without taking a bank loan.

Drawbacks of PLC

expensive to set up due to paying for legal advice

Risk of hostile takeover 

what  is a public sector organisation?

Organisations which are owned or run by the local or national government eg. NHS or police

What are the main types of public sector organisations?

public corporations- These are enterprises owned by the state but charge for their services and are mainly managed by the central government. (channel 4)

Public services - Provide services ot the whole naiton to meet basic needs(NHS)

Municipal services - These are run by the local government or council.

what aer the two types of not for profit organisations ?

social enterprises and mutual businesses

what are social enterprises ?

These are businesses that have social aims (like job creation) and trade in order to benefit the community. An example is the Co op.

why do people operate not for profit organisations 

they do this in order to have a strong belief in a particular issue like protecting the environment 

what are reasons for buying shares ?

• A increase in share price which means a greater rep which can attract stakeholders

• Shares may also be recieved in the form of dividends. The more profit reults in more dividends.

risks of buying shares

• share price can fall if the business is profitable and performing well

• Companies can make lower profit than expected meaning lower dividends than expected resulting in the short term side effect of a fall in share price.