Business Organisation Key Terms

Small Business Ownership

Sole Trader: A business owned by one person.
Partnership: An agreement between 2-20 people to jointly run a business and to share profits and risks.
Deed of Partnership: This is a legal document which shows how responsibilities, profits and workload are
to be shared.
Sleeping Partner: A partner who puts in finance but does not take part in running the business.
Unlimited Liability: Responsibility for the debts of a business extends to the owners personal wealth. E.g
their home and possessions could be used to pay off debts.

Large Business Ownership
Limited Companies: A business structure which has a separate legal identity to its owners known as share-
holders.
Memorandum of Association: The document which outlines the external information of the company.
Limited Liability: Responsibility for debt is limited to the amount of money put into a business.
Private Limited Company (Ltd): A company that is owned by shareholders but shares are not for sale to
the general public.
Public Limited Company (PLC): company where shares may be sold to the general pub-
lic through the stock exchange.
Board of Directors: Are appointed by shareholders to decide policy and run the com-
pany.
Dividend: Payments made to shareholders from the profits of a company.
Franchise: The right to trade under an established name.
Franchisee: The person or organisation buying the right to operate a franchise outlet.
Franchisor: The person or organisation selling the right to operate a franchise.
Business Organisation Key Terms

Small Business Ownership
Sole Trader: A business owned by one person.
Partnership: An agreement between 2-20 people to jointly run a business and to share profits and risks.
Deed of Partnership: This is a legal document which shows how responsibilities, profits and workload are
to be shared.
Sleeping Partner: A partner who puts in finance but does not take part in running the business.
Unlimited Liability: Responsibility for the debts of a business extends to the owners personal wealth. E.g
their home and possessions could be used to pay off debts.

Large Business Ownership
Limited Companies: A business structure which has a separate legal identity to its owners known as share-
holders.
Memorandum of Association: The document which outlines the external information of the company.
Limited Liability: Responsibility for debt is limited to the amount of money put into a business.
Private Limited Company (Ltd): A company that is owned by shareholders but shares are not for sale to
the general public.
Public Limited Company (PLC): company where shares may be sold to the general pub-
lic through the stock exchange.
Board of Directors: Are appointed by shareholders to decide policy and run the com-
pany.
Dividend: Payments made to shareholders from the profits of a company.
Franchise: The right to trade under an established name.
Franchisee: The person or organisation buying the right to operate a franchise outlet.
Franchisor: The person or organisation selling the right to operate a franchise.

Business Organisation Key Terms


Growth
Diversification: This is when a business expands by moving into new markets. This might be achieved by a
merger.
Horizontal Integration: One firm merging with another in the same industry at the same stage of produc-
tion.
Lateral Integration: A firm expands by moving into a smaller, but different, area of production eg. build-
ing society buys an estate agent.
Merger: The owners of two businesses agree to join their firms together to make one larger business.
Vertical Integration: One firm merges with another at a different stage in the production chain.

Structure & Organisation
Business Plan: A detailed outline of a business intention over a period of time.
Chain of Command: A structure within a firm allowing instructions to be passed downwards through the
organisation.
Objectives: Targets for a business to judge its success over a period of time. Objectives must be
S.M.A.R.T
Organisational Structure: The levels of management and division of responsibilities within an organisation.
SWOT: An analysis of the strengths, weaknesses, opportunities and threats of a business.
Start up Costs: Costs paid out when setting up a new business or when expanding an existing one.

Business Organisation Key Terms


Growth
Diversification: This is when a business expands by moving into new markets. This might be achieved by a
merger.
Horizontal Integration: One firm merging with another in the same industry at the same stage of produc-
tion.
Lateral Integration: A firm expands by moving into a smaller, but different, area of production eg. build-
ing society buys an estate agent.
Merger: The owners of two businesses agree to join their firms together to make one larger business.
Vertical Integration: One firm merges with another at a different stage in the production chain.

Structure & Organisation
Business Plan: A detailed outline of a business intention over a period of time.
Chain of Command: A structure within a firm allowing instructions to be passed downwards through the
organisation.
Objectives: Targets for a business to judge its success over a period of time. Objectives must be
S.M.A.R.T
Organisational Structure: The levels of management and division of responsibilities within an organisation.
SWOT: An analysis of the strengths, weaknesses, opportunities and threats of a business.
Start up Costs: Costs paid out when setting up a new business or when expanding an existing one.