Appropriateness of Different Forms of Ownership

Flashcards about the factors that affect the appropriateness of different forms of ownership

Privatisation

The transfer of a business, industry, or service from public to private ownership and control.

Growth

Businesses start of small and gradually get bigger, often changing their legal status as they grow.

Size of the Business

Small businesses are often sole traders or partnerships; PLCs are much larger with thousands of employees.

Need for Finance

The need to obtain more capital often drives a change in the type of organization.

Control

Many owners like their own independence and prefer to stay sole traders.

Limited Liability

Owners can protect their own financial position if the business is a limited company.

Objectives and the type of organisation

Small sole traders may be happy with making small amounts of profit and a comfortable lifestyle.

Profit satisficing

Small sole traders are happy with making a small profit .

Becoming a public limited company - benefit

This allows the company to sell shares to the public on the stock exchange.

Becoming a public limited company - problem

Shares can be bought by anyone including rival companies, potentially leading to loss of control.

Sole Traders - Capital

Sole traders may find it difficult to raise capital by themselves

Partnerships

Businesses may take on a partner or become a private limited company

Public Limited Companies - Capital

Public limited companies raise more capital.

Factors affecting ownership

The appropriateness of different forms of ownership

Privatisation - Definition

The transfer of a business from public to private ownership

Why Businesses Go Public

Raising capital for expansion.

Why Businesses Don't Go Public

Loss of control.

Limited companies

Owners get more financial protection

Unlimited Liability

Having unlimited liability can put your personal assets at risk if the business fails.

Multinational Companies - Aims

Most multinational companies aim to grow and dominate the global market.

Limited Liability - Owners

Owners can protect their own financial position.

Privatisation

A business activity.

Small Sole Trader

Small amounts of profit and live a comfortable lifestyle

Stock control

The appropriate amount of stock is being held.

Limited company

Owners of companies that protect their financial position

Sole Traders or Partners

Owners who can't protect their own financial position.

Public to Private

Privatisation happens when a business is transferred to private ownership.

Liability

Unlimited Liability affects owners.

Becoming Limited

Owners become limited companies for financial protection.

Finance Changes

Changing organization can help you to get more money

New Partnership

Owners lose control

PLCs - Growth

Public limited companies raise capital.

Small Trader Objective

Small trader objective is to seek profit.

Benefits of a public limited company

Raise more capital and expand

Problems of a public limited company

Lose control of the company

Capital use

Capital is used to expand with no interest paid

Financial Info

Financial information can't be kept private

Accounts usefullness

Accounts are published and are used by competitors

profit objective

Objectives

Get bigger

Most businesses do this.

Capital

Type of ownership

Partnership

type of company.

PLC

Type of company

Protection

Protect position

objectives

Aim to grow

Owners

Owners lose control

Growth and success

Business growth

Objectives

Owners have different objectives

Privatisation helps

Privatisation can help the performance of a business.

Private ownership

New ownership has an impact.

Owners Direction

Owners can choose the direction of the company.

Indepence

Owners can have independence.

Owners small traders

Owners can be small.

Aim

Aim is to be on top.

Go public

Owners go public.

Owners loss

Owners will lose control to outsiders.

Capital sell

Owners sell shares.

Transfer a business

Privatisation is transfer of a business.

Growth

Public to private is growth.

Thousands

PLC thousands of employees.

Turnover

PLC huge turnover.

Limited protection

Owners can protect.

Finance

Growth helps finance.