1.2 Business Ownership Flashcards
What are the 5 types of businesses?
Sole trader Partnership PLC - Public Limited Company LTD - Private Limited Company Not-For-Profit
What is a sole trader?
A form of business that is owned by 1 person. You don’t need to register with the government or fill in lots of forms. You have unlimited liability.
Advantages of being a sole trader?
Quick and easy to set up. You make all the decisions so decisions can be made fast and you can do what you want. You keep all of the profits.
Disadvantages of being a sole trader?
Can be stressfull.
Althouh you can employ other people you might need to manage finance, marketing… some people may not be good at all these things.
You have unlimited liability.
There is usually a lot of work to be done.
May be difficult to raise money (capital).
Sole traders are normally small businesses and therefore won’t have large bargnin powers which a large business may have.
What is unlimited liability?
The personal possesions of the owner of a business are at risk if there are any problems. There is no limit to the amount of money which the owner may need to pay out (eg from a lawsuit). The business doesn’t have it’s own legal idenity.
What is limited liability?
When the business has a seperate legal identity than the owner. If the business is sewed then the owner can only loose as much money than they put into the business.
What is a partnership?
When 2-20 (with some exceptions) people make a business to pursue a common goal
What is a deed of partnership?
What might it include?
A document writen and signed by all the people involved. It sets out the rules of the partnership
It normally includes:
How to divide up profits
How decisions (voting) is to be done
How to value the business if someone wants to leave
How to decide on weather someone else wan’t to join the partnership?
Why might you want a deed of partnership?
So that you can use it to avoid disputes in the future.
