1.2 Different Business Forms Flashcards
Define sole trader.
Individual trading in their name.
What are the advantages of sole traders?
Freedom and control over decisions.
Entitled to all profit.
Simplicity.
What are the disadvantages of a sole trader?
Unlimited liability.
Long work hours.
Limited finance options.
What is a private limited company?
When a business has gone through the process of incorporation to become a company.
Define incorporation.
The process of separating the owner from the business.
What are the advantages of a private limited company?
Limited liability.
Shares can be sold to raise finance.
Appears more trustworthy to stakeholders.
What are the disadvantages of a private limited company?
Limited to who can be sold shares (friends and family).
Have to publish financial statements.
What is a public limited company?
When shares can be sold to anyone on the stock exchange.
What are the advantages of a public limited company?
Trustworthy.
Limited liability.
Shares a good option to raise more finance.
What are the disadvantages of public limited companies?
Have to publish statements - time consuming.
Vulnerable to being taken over.
Define limited liability.
Owner is only at risk of losing the amount of money that they put into the business.
Personal possessions are safe due to legal separation.
Define unlimited liability.
Owner is responsible for all debts and personal possessions are at risk.
What is the abbreviation for public limited company?
PLC.
What is the abbreviation for a private limited company?
Ltd.
What is the purpose of shareholders in a business?
Provide the business with finance and have an influence on decision making.
