Chapter 4 - Types of business organizations

Franchise

A business which has bought the right to trade under an established name.

Franchisee

pays for: expansion, shops & license to use the brand name.

Franchise

A business which has bought the right to trade under an established name.

Franchisee

pays for: expansion, shops & license to use the brand name.

Lack of incentive

to: increase customer choice & to increase efficiency.

Co operatives

: groups of people who enter a business & share the benefits.

Liability

the legal debt a company owes to third- party creditors.

joint venture

is when 2 or more businesses agree to start a new project together, sharing the capital, risks & profits.

Memorandum of association

- ensure statement clause allowing conversion to public limited.

Partnerships

: owned and controlled by two or more people.

Articles of association

= A document containing all the regulations that governs the company.

Subsidies

lead to inefficiency: managers think that govt are there for bailout & unfair as are not given to private sector.

Shareholders CAN

replace directors but it brings bad publicity & loses stability as new directors may be inexperienced & may have contrasting ideas, goals and plans.

Private limited companies

owned, financed & controlled by between 2 & 50 people.

portion of capital

Sharing of losses & profits- split risk based on invested by each partner.

Franchisor

makes most decisions → fewer decisions to worry about.

Memorandum of association

= A document containing all fundamental information which are required for the incorporation of the company.

Partnerships

owned and controlled by two or more people

Private limited companies

owned, financed & controlled by between 2 & 50 people

Public limited companies (PLCs)

owned, financed & controlled by a minimum of 2 shareholders with no maximum number of shareholders

Franchise

A business which has bought the right to trade under an established name

Sole Traders

Owned, controlled & financed by one person

Co-operatives

groups of people who enter a business & share the benefits

Unincorporated

Legally, the owner & the business are the same

Incorporated

The owners & the business have separate legal identities

Liability

the legal debt a company owes to third-party creditors

Sharing of losses & profits

split risk based on portion of capital invested by each partner

More Capital

expansion & growth

Separate legal identity

separate accounts from owner

Denoted by

‘Limited, ‘Ltd or ‘Pty Ltd

Limited liability

less risk

Shares

Existing shareholders only, & transfer needs consent

More ability to raise capital

expand faster

Denoted by

‘PLC, ‘plc or ‘inc

Regulations & control

protect shareholders interest

Lack of privacy

publication of accounts

Expense of shelling shares to the public

specialist bank, merchant bank, prospectus

Memorandum of association

ensure statement clause allowing conversion to public limited

Franchise

A business on the use of the brand names, promotional logos & trading methods of an existing successful business

Franchisee pays for

expansion, shops & license to use the brand name

Subsidies lead to inefficiency

managers think that govt are there for bailout & unfair as subsidies are not given to private sector

Lack of incentive to

increase customer choice & to increase efficiency

^^Corporatization

^^

Franchise

A business based on the use of the brand names, promotional logos & trading methods of an existing successful business.

Public Corporation

Owned by the Government but isn't directly run by them. The state appoints the BOD & gives rgem business objectives to follow

Corporatization

When public corporations run as if they are in the private sector. This is to prepare for 'privatzation'

Board of Directors (BOD)

Directors appointed by shareholders, to run the business. The BOD then appoint managers for day-t--day tasks