1.2 Business Ownership Flashcards
What is a sole trader?
A sole trader is someone who sets up a business on his or her own.
What are the advantages of being a sole trader?
- It is easy to set the business up.
- You make all the decisions yourself. This means decision making is fast.
- You keep all the profits yourself.
What are the disadvantages of being a sole trader?
- Stressful decision making.
- Has to deal with all aspects of the business: the finances, the marketing and the running of the business itself.
- You have unlimited liability. This means that you could lose everything you own.
What does profit measure?
The difference between the values of revenue (sales) and its total costs.
What is unlimited liability?
Unlimited liability means that the owner’s personal possessions are at risk if there are any problems with the business, e.g. can’t pay off debt.
What is a partnership?
When two or more people join together in a business enterprise.
What are some advantages of a partnership?
- Share workload.
- Better decisions made for the business-more discussion.
- Share skills.
What are some of the disadvantages of a partnership?
- Might disagree with the other partners.
- Unlimited liability.
- Share profits.
What are stakeholders?
Stakeholders are individuals, groups or organisations that are affected by the activity of the business.
What is a shareholder?
A shareholder is a person or an organisation that owns part of a company. Each shareholder owns a share of the business.
What is a company?
A business that has its own legal identity.
What is the stock exchange?
A market for buying and selling shares of public limited companies.
What is a flotation?
A flotation occurs when a private limited company (ltd) becomes a public limited company (plc) and has its shares listed on the stock exchange.
What are the advantages of setting up as a private limited company?
- If the business founders die, the company still exists and is passed on to the shareholders.
- Limited liability (the shareholders’ personal possessions are safe).
- less paper work than plc.
What are the disadvantages of setting up a private limited company?
- various legal procedures need to be completed, such as registering the company.
- the business must pay corporation tax.
- accounts must be checked by an independent accountant, which will create additional cost.
Who owns a private limited company?
The shareholders.
What is a public limited company?
A public limited company is a company that has shares that are sold to the public on the Stock Exchange.
What are the advantages of becoming a public limited company?
- plc’s can advertise its shares to the general public-more potential investors.
- plc’s attract more media coverage because they usually have more shareholders.
What are the disadvantages of becoming a public limited company?
-A plc cannot control who buys its shares, so managers may find that a competitor buys control of the company and takes it over.
What is a not-for-profit organisations?
A not-for-profit organisation is set up to achieve objectives other than profit; for example, a charity.
What is a deed of partnership?
A Deed of Partnership is an agreement between partners that sets out the rules of the partnership, such as how profits will be divided.
What is corporation tax?
Corporation tax is when a company has to pay tax on their total earnings in a year. However, if a company is not making a profit, they don’t have to pay any corporation tax.
