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LC Business Org
Types of Business Organisation
| Question | Answer |
|---|---|
| Sole Trader | A sole trader is a self-employed person who owns and runs their business as an individual. |
| Partnership | Min. 2-Max. 20 people carry on a business with the purpose of making a profit. Jointly owned by all. |
| Company | A separate legal entity formed under the companies act 1963-2009. Owned by shareholders. |
| Private Ltd. Co. | Min.1/ Max.149 Shareholders. All must have share capital and they all have ltd. liability. |
| Public Ltd. Co (PLC) | This is when a Private Ld. Co. decides to go big, additional finance is required and their shares are quoted on the stock exchange (public). |
| Co-operatives | Open to all. Each member has one vote. Controlled by a Mgmt. Committee, decided at the AGM. |
| Worker Co-operative | Small local business, owned and run by the workers. They receive a salary and a share of the profits. |
| Community Co-operatives | Local business providing a local service e.g. Credit Union |
| Multinational/ Transnational Co. | HQ is in one country but owns and operates businesses in many other countries. |
| State Owned | Owned by the Government. Provide many vital services. |
| Franchising | Method of marketing good / services via a proven franchise model. |
| Does a Sole Trader have limited or unlimited liability? | Unlimited. They're liable for all the debts of the business. |
| Advantages of a Sole Trader. | * Easy to form * Easy to manage * Little capital involved to set-up * Little risk involved |
| Disadvantages of a Sole Trader. | * Unlimited liability * Many not have all the skills to do the job - sales/ marketing/ accounts * May not have access to all the capital to start-up *No continuity of existence - death/ retirement * Pays higher rate of tax |
| What should be included in the deed of partnership | * How much capital each puts in. * How profits are to be shared. * What salary each gets. * The name of the business. * The date of commencement of the business. |
| Advantages of a Partnership. | * Easy to set-up * Mix. of business skills amongst partners * Capital from more than 1 source * Loses shared * Accounts private |
| Disadvantages of a Sole Trader. | * Unlimited liability - all partners jointly liable * Profits shared * Disagreements * Problems may arise over how to value and sell the interest of one of the partners |
| What's Limited Liability? | It's when someone invests in a business as a shareholder - their only loss if the business goes bankrupt is the amount they invested. Not liable for any business debts. |
| What's the difference between a Private & a Public Limited Company? | * PLC can offer their shares for sale to the public * x2 Directors for PLCs/ x 1 for a Ltd. * PLCs are required to hold an AGM, not for a Ltd. * PLCs have 6mths in which to file their A/Cs/ Ltd. 9mths. |
| What's a Ltd. Company? | * Legal entity Companies Act 1963-2009 * Has share capital/ shareholders ltd. liability * Min1/ Max99 Shareholders * Shares cannot be issued to the public * Cert of Incorporation * Publish ACs - SME No/ Large Y |
| What's 'The Memorandum of Association'? | The constitution of the company. Sets out the external relationship that exists between the company and the general public. |
| What's included in The Memorandum of Association? | * Ends in PLC or Ltd * Business of the Co. must be specified and any further related activity * Statement of Ltd. liability * Statement of amount of authorised share capital * Location of registered office |
| What are Articles of Association? | These set out the internal rules for running the company. |
| What's included in the Articles of Association? | * Statement of authorised share capital - classes of shares, ord. shared and preference shares * Voting rights * Procedure for issuing/ transferring shares/ calling meetings of Shareholders * Electing/ replacing Directors * Winding up the Co. |
| Advantages of Ltd. Co. | * Limited liability * Continuity of existence * Separate legal entity - can sue/ be sued * Formal management structure * 12.5% corp. tax until 2023 when it goes to 15% |
| Disadvantages of Ltd. Co. | * Costly/ Legal formalities setting up * Profits to be shared * Activities restricted to what's set in the M&AA * A/Cs to be audited and sent to shareholders * Reduced access to capital - shares not public |
| Why would a Ltd. Co become a PL C ? | They want to expand and the only way is going public to sell shares on the stock exchange in order to generate new capital investment. |
| What's a PLC? | * Min7/ No Max Shareholders * Shares can be issued to the public - no control over who buys * Trading CERT * Publish ACs * Must end name in PLC/ plc |
| Advantages of PLC. | * Raise large amounts of capital from share issues * Limited liability to shareholders * Continuity of existence * A/Cs published annually * Share Capital cannot be withdrawn by shareholder |
| Disadvantages of PLC. | * Set-up costs are high est. €400K * Running costs are high - stock exchange regulations * A/Cs to be published (not good if doing poorly) * Profits shared |
| Advantages of franchising to the franchisor | * Expand into locations with no market share * Capital investment is less * Agreed franchise fee from each franchisee |
| Advantages of franchising to the franchisee | * Well known brand name e.g Easons/ Starbucks/ Supervalu * Reduced risk as brand is known * Purchasing power * No direct competition from same brand in same location |
| Disadvantages of franchising to the franchisee | * Upfront and ongoing payments * Loss of control * Cannot sell without the agreement of the franchisor |
| Name 3 features of a worker co-operative. | 1) min. 8 workers 18+ 2) commercially viable 3) limited liability 4) owned by the workers - invested interested in it doing well 5) equal say in decisions 6) less absenteeism 7) more flexible 8) share all profits |
| Name 3 features of a community co-operative. | 1)provides social and community services e.g. CU 2) run for profit 3) gives value to its members 4) operated by a Board (elected by members) 5) share all profits to members |
| What's the benefit of having a TNC/ MNC in Ireland? | * employment to construct the site * employment when facility opens * balance of imports/ exports * pay tax to the Government * commercial impact on local economy * easier to attract new investment |
| What's the disadvantage of having a TNC/ MNC in Ireland? | * demand state incentives/ grants/ tax concessions * if they close - serious impact on a community * cheaper labour costs elsewhere * repatriate their profits (send them home) |
| What are the advantages of a State Owned Business? | * Provide essential services that may not be viable for a private company to do * May want to control some industries * Protect/ Create employment * Economies of scale * State bodies promote Tourism/ Industry/ Technology that Private couldn't afford |
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