Business management 1.2

How many advantages are there to having a business part of a sole trader?

5

How many disadvantages are there?

6

How many main reasons features of a sole trader?

6

What are these advantages?

Complete control over all the important decisions Flexibility in terms of working hours, products and services, and changes to operations Privacy Minimal legal formalities Close ties to customers

What are the 6 disadvantages of becoming a company?

Setting up a company can take time and cost a great deal of money to fulfil the necessary legal requirements Selling shares, especially if the company "goes public" Owners risk partial or entire loss of control of the business There is loss of privacy A company has no control over the stock market A company limited control over who buys its shares

What is another term for the owners of a company?

Share holders

The company has not control of the stock market

Shares and prices may fall, and this is unpredictable. Even though the company may of not done anything wrong

There is a strong communal identity

They often have highly motivated employees and other stakeholders working together with a common sense of purpose. And they often report a high degree of satisfaction

They help people or causes

They provide serivices and good that aid in becoming a better world

The business operates the same functions as any other business

They still have to make the same decisions as regular companies, but sometimes have to pay more attention to than companies that turn more of a profit

What are non-governmental organizations?

They support a cause that is socially desirable. Some are with single causes like "save the whale" where as others are broader like "green peace". Some can be apolitical, while others are political. These are NOT run by the government

Elaborate on "article of association"

This document specifies how the company will be regulated internally. It will, for example, explain the initial organization of the executives of the company.

PPP's

This is the business between a public business and a private business. Like building a building for a school, the school is private and needs to get the school built with a public company, this isn't meant for profit but do expect a return

Micro financiers

This is very popular in low income countries, the basic primes is that money can be given to poorer families expecting a payment back so the company can still return a small profit. This allows people that would not normally be acceptable for a loan to get one and move close to financial independence. This has been know to be profitable for both parties.

How many types of commercial organizations are there?

4

What does Bhd stand for?

Berhad (Malaysia, Brunei)

What are the three disadvantages of starting a For-profit social enterprise?

A favourable legal status There is a strong communal identity There are benefits to the stakeholder community

What are the 5 types of cooperatives?

A financial cooperative A housing cooperative A workers cooperative A producer cooperative A consumer cooperative

What does for-profit social enterprise mean?

A form of business that has a social purpose. They will not let anything compromise that

Setting up a company can take time and cost a great deal of money to fulfil the necessary legal requirements

A person setting up a company must retain lawyers to meet the legal requirements and filling in the paper work, this can take a lot of time.

What are the 5 advantages of becoming a business

Access to finance is easier than for sole traders and partnerships The investor has limited liability There is continuity There are possibilities for expansion An established organizational structure exists

What does AB stand for?

Aktiebolag (Finland, Sweden)

Elaborate on "the business is close to the customer"

As a sole trader is usually a small business it is easy for the the sole trader to interact with customers on an individual basis. This can help them to provide more personal services

Decision making is complex and time consuming

As there are many parties involved and there is more of a democracy it can take a very long time to finally come to a conclusion.

There may be insufficient capital for financial strength

As they tend to try and sell their products and services for as little as possible then they tend not to have large financial strength

What is another name for a profit based organization?

Commercial Organization

There are possibilities for expansion

Companies have more opportunity to expand because generally they last long and have more access to finance

What are these disadvantages?

Competing by yourself can be daunting There can often be stress and ineffectiveness as the sole trader makes all the decisions There we be a struggle is there is an accident (like the owners death) There may be little expansion as the sole trader spends a lot of time only running the business they have Generally there is a limited capital, this is because people look for day to day cash instead of prospects for the future There is are a lot of chances for the owner to mess up (debt)

What are the four types that come under "for profit social enterprises"?

Cooperatives Micro-financers public-private partnerships

What are the three types on for-profit social enterprises?

Cooperatives Micro-financiers Public-private partnerships (PPP)

What are the three disadvantages?

Decision making is complex and time consuming There may be insufficient capital growth There may be insufficient capital for financial strength

What are the 9 features of partnerships

Decisions are made jointly by the partners The business is owned and managed by more than one person No legal distinction exists between the business and the partners Finance is usually more available than for a sole trader Some partners may be "sleeping partners" The business operates as a partnership can offer a more varied service than a sole trader Partnerships typically have a greater degree of accountability than sole trader Partnerships are typically more stable than sole traders and have a higher likelihood of continuity Parters do not necessarily share all the profits equally

The greater democracy in the business than in other organizations

Decisions made depend to be a lot more consultative and transparent. They do not take any aggressive business strategies. This basically derives from the whole idea behind being a non profit business.

They can innovate

Employees of members are often forced to be creative, to try new ideas and tactics to address problems

Elaborate on "the finance is usually limited"

Finance is usually limited. this can be because their personal saving are limited or any other source is limited, eg banks for loans, family friends. etc

What are the four reasons for becoming a business?

Generally the status of being a business mean being more successful Selling share is a good source of finance Increases stability of a business as it has legal existence from the owners. If a share holder dies the business will still go on Companies usually have an increased chance of recieving finance and loan due to the stability

What does GmbH stand for?

Gesellschaft mit berschraenkter Haftung (Austria, Germany)

What does GIE stand for?

Groupement d'interet Economique (France)

A financial cooperative

Helping with finances to people who often cant get a loan. Also working to help with finance issues that take over ethics

A company had limited control over who buys its shares

If a rival company want to buy part of that company and your shares are public then there is nothing stopping them from doing so

What does INC stand for?

Incorporated (USA/Canada)

Elaborate on "a company is held to a high degree of accountability"

Information must be given to the share holders so they can understand the state of the business. Publishes audited company reports annually and in some places four times a year An annual general meeting (AGM) An extraordinary general meeting (EGM)

Profits are not generated

Instead these business generate a surplus which in then given back to the cause. Some times the surplus is used for sources that the company was created on and need

A producer cooperative

Is where different types of producers come together to collaborate and help each other, example wine producers and grapes producers. The grapes are made and given to the wine makers that may have equipment that the grape producers do not

Elaborate on "Registering the business is generally relatively easy and inexpensive"

Laws obviously differ from country to country but sole traders tend to have less paper work to fill out and file. this is because the sole traders make all their won decisions so they don't have to record a lot of decisions and decisions made with other external parties.

What does LTD stand for?

Limited Company (various)

What does LLC stand for?

Limited Liability Company (USA)

What are 7 major financial centres?

London New York Frankfurt Tokyo Shanghai Singapore Online

An established organizational structure exists

Mangers and workers do not have to change every time a share holder shares their shares. This stability can help to maintain the structure

What are the two types of document?

Memorandum of association Articles of association

What are the three ways shareholders are rewarded?

Money - the price of the shares that they own may increase. As the total profits in the company increase so do the profits Money is divided up and give to the share holders depending of the amount of shares that they own, this is done every annual quarter The share holder has limited liability as they are not responsible for making any of the decisions depending of their status

There may be insufficient capital for growth

Most business rely on healthy profit margin and profit, as there is none of this in a for profit social enterprise it can be very hard to expand.

What are the two broad Non-profit social organization types?

Non-governmental organizations (NGO) Charities

The can foster a philanthropic spirit in the communtiy

People feel good about helping others, which forms socially constructive veiws

What does PTE stand for?

Private Limited Company (UK)

What are the two types of companies?

Private limited company Public limited company

What is the main difference

Private limited company can only sell shares. Private limited is usually only giving share to people know to the owner, such as friends and family. There are usually only small amounts of shares, like 20 or so.

What does PLC stand for?

Private or Public Limited (UK)

What are the four main features of a PPP

Profit is important but not the priority There is collaboration between the business and the local community There is a greater democracy that in other organizations The business operates the same functions as any other business

What are the three main features of both NGO's and charities?

Profits are not generated Donations are important There is unclear ownership and control

A consumer cooperative

Provides a service to the customers who are also the owners of the business

What is another term for total revenue?

Sales

Profit is important but not the priority

Social aims take over. The only reason for profit is to not go bankrupt.

What does SA stand for?

Sociedad Anonima (Latin american except Brazil and Mexico)

What does SA stand for?

Sociedades Anonimas (Brazil and Portugal)

What does SpA stand for?

Societa per Azioni (Italy)

What are these four types?

Sole trader Partnerships Companies or corporations For profit social enterprises

Elaborate on "the sole trader owns and runs the business"

Sole trader may employ other people, including those empowered to make some of the decisions, but the sole traders themselves make management decisions and have ultimate responsibility for the business

Elaborate on " the sole trader has privacy and limited accountability"

Sole traders have a high degree of privacy. The only people the must declare their sales to is the tax authorities. And perhaps and other people that they're borrowing money from. Such as lessors (the people a company leases something from)

What is a non profit social enterprise

Some business operating in private sector do not make any profit from their business, they don't make any profit what so ever. Even the surplus money is not divided up between the owners, it is given away to benefit social circumstances

Surplus equation

Surplus = total revenues - total costs

What are Charities?

The desire to help those that can not help themselves. There are single event charities that provide emergency aid for a cause. Others are single issues who are constantly working to help the same cause.

Elaborate on "memorandum of association"

The document records the key characteristics and the external activities of the company being created.

What can be a big disadvantage for the business owner when becoming a business?

The business that they once owned they have now lost control over as there are other share holders

There is continuity

The business will not fail if the owner dies, it can still go bankrupt and become liquidated. But still have more chance for success than a sole trader

A favourable legal status is achived

The legal structure for the for profit social enterprises allow people to all join in and do something good

Owners risk partial or entire loss of control of the business

The owner must give up some of the business when the move to becoming a company.

What are the three costs to a person investing in a business?

The price of a share may decrease if the company is not performing well. The company may also choose not to issues dividends if they don't have to. As they own little part of the company the have a very small voice and cant make any of the company decisions.

They can foster informed discussions in the community about allocation of resources

The public will become more informed about the cause making a lot of people more aware

Elaborate on "the share holders own but do not run the business"

The purchase of shares is only an investment, they will not run day to day operations. Professional managers are employed to make those decisions

Elaborate on "the business and the owners are divisible"

The share holders are not liable to any of the company's debt, They are only limited to their investments. People can choose to sell their shares at any time for any reason.

What are the six main features of a company?

The share holders own but do not run the business The business and the owners are divisible The legal existence and many of the details are legally recorded and matters of public record Greater finance is generally available A company is held to a high degree of accountability Compare to other forms of business organizations, companies have greater stability and a higher chance of continuity

Elaborate on "No legal distinction exists between the business and the sole trader"

The sole trader is the business and, thus, is liable for all the debts of the business or other claims (such as the outcome of a lawsuit) In other words, the sole trader has all the liability.

What are these 6 features?

The sole trader owns and runs the business No legal distinction exists between the business and the sole trader The finance is usually limited The business is close to the customer The sole trader has privacy and limited accountability Registering the business is generally relatively easy and inexpensive

There is a collaboration between the business and the local community

There is a connection between the public community and the company as they both share the same ideas for what is best

Access to finance is easier than for sole traders partnerships

There is more stability than in a sole trader and therefore banks are more likely to invest

Selling shares, especially if the company "goes public"

There is not a guarantee that the desired or intended amount of finance will be raised. Some times when a company goes public it can be unsucessful

There is unclear ownership and control

There is rarely an owner of a charity, but there are managers, they do not get paied but volunteer to make sure that the charity still runs smoothly

There is a loss of privacy

There must be a lot me recording of information and meetings, this is to please all the investors, this is done with accounts. It can be hard for a former business that in not used to doing that. And they must make their success clear which in turn can make the business worse as more people wont want to do business with a company they know is failing

The investor has limited liability

They can only loose the value in the shares, but by investing very small amounts in a lot of business will lower the risk of failure but wont make large amounts of money

Donations are important

They cant and don't rely on government funding, so donations are very important. All charities want to be able to provide the most, and the more donations the more that is possible

What are the four advantages to being a charity?

They help people or causes in need They can foster a philanthropic spirit in the community They can foster informed discussions in the community about allocation of resources They can innovate

There are benefits to the stakeholder community

They help stakeholders, including the direct beneficiaries of their product and services.

Elaborate on "the legal existence and many of the details are legally recorded and matters of public record"

To become a business there must registered paper work, and must have two copies to the appropriate government agencies.

What is the equation for profit?

Total revenue - total loss

What does going public mean?

When a company becomes a Public Limited Company it means that they have to put their shares somewhere for public access, like a stock market. It has to be based in one of the major financial centers

Elaborate on "compared to other forms of business organizations companies have greater stability and higher chance of continuity

When a shareholder dies or sells shares the company will still carry on. It would have no effect on the company, a partial owner would just be replaced with another partial share holder. A company could theoretically last for ever, stella artois 1366

Elaborate on "greater finance is generally available"

When all the shares are sold there is a initial growth in capital. Any money made after this is in relation to the first income, whether it is gain or loss

A workers cooperative

is a business that is owned and run by the workers themselves. This does not pay higher wages or salary to managers. The workers are the priority. These often emerge when a business is about to fail

A housing cooperative

is run to provide housing for its members as opposed to providing rent for private landlords. They often buy apartment blocks and each member entitled to one housing unit in the building, costs to individual members are lower