1.3 Business Ownership Flashcards
What is a Sole Trader?
A Sole Trader is a business owned and financed by one person.
(Suitable for start-up businesses that need a small amount of finance, usually have low financial risk, and require limited or non-specialised skills.)
What are two advantages of being a Sole Trader?
- The owner keeps all the profit and can decide what to do with it.
-The owner makes all the decisions and can set the objectives of the business.
What are two disadvantages of being a Sole Trader?
- Unlimited liability means the owner is responsible for debts and may lose personal possessions.
- It may be difficult to obtain a loan, making it harder to finance short-term and long-term issues.
What is a partnership?
A partnership is a business owned and financed by 2-20 partners.
What types of businesses are suitable for a partnership?
Partnerships are suitable for start-up or established businesses wanting to grow.
What are the reasons for choosing a partnership?
Partnerships are chosen when businesses need a larger amount of finance, seek low financial risk, require a wider range of skills, or when owners want to keep control.
What are two advantages of a partnership?
- More ideas and skills therefore the business is likely to be more efficient.
- Increased amount of start-up capital therefore easier to start the business off.
What are three disadvantages of a partnership?
-Unlimited liability means owners are responsible for the debt and may lose personal possessions, making it more risky.
- There may be arguments between partners because they have different views.
-You have to split profit.
What is a private limited company (Ltd)?
Shares are sold to family and friends.
What businesses are suitable for private limited company’s (Ltd)?
Start up businesses and established businesses wanting to grow
What are two advantages of a private limited company?
- can sell shares to friends and family therefore raise more capitol to invest into the business.
- limited liability therefore shareholders are not responsible for the debt of the business, they only lose their initial investment which makes it less risky.
What are three disadvantages of a private limited company (Ltd)?
- Dividends are paid to shareholders therefore a percentage of the profits will have to be distributed.
- Costs are higher to set up the business.
- Your financial information is available to the public resulting in an increased competition.
What is a public limited company (PLC)?
shares are sold to anyone on the stock exchange.
What is a public limited company suitable for?
Establishes businesses that: wish to grow, needs a very large amount of finance, has a very high financial risk)
Name two advantages of a public limited company (PLC)
- Can sell shares on the stock exchange therefore raise more capital to invest into the company.
- Limited liability therefore shareholders are not responsible for the debt of the business, they only lose their initial investment which makes it less risky.
Name three disadvantages of a public limited company (PLC)
- Dividend’s are paid to shareholders therefore a percentage of the profits will have to be distributed.
- costs are higher to set up the business.
- your financial information is available to the public resulting in increased competition.
