1.4 Options Of Business Start Up Flashcards
What is a sole trader?
An individual who owns and runs their own business. The simplest form of business. Has unlimited liability.
Sole trader Advantages and disadvantages?
Adv- Cheap and easy to set up. You keep all the profits Competitors can't see your accounts Dis- Unlimited liability Limited sources of finance Few specialist skills- owners has to do everything or buy in expertise
What is limited liability?
An investors liability/financial commitment is limited to the total amount invested or promised in share capital
What is unlimited liability?
The owners of a business are responsible for the total amount of debt of the business. Could lose personal belongings like home and cars.
What skills do a sole trader need?
- Accounting skills
- Enthusiasm
What is a partnership?
Two or more people run the business. Each partner is equally responsible for debts incurred. Each partner takes a share of the profits. Usually have unlimited liability but limited liability partnerships are becoming more common
What is a sleeping partner?
Someone who invests money into a business but does not run it
Partnerships advantages and disadvantages
Adv- Share decision making More people contributing finance Each partner may have different skills Dis- Unlimited liability Profits are shared between partners Decision making can be slow and cause disagreements
What is a private Limited Company?
The owners and the business are separate legal entities
Share holders are the owners of private Limited Company.
Has LTD after its name. Can only sell stars to family and friends.
Private Limited Company advantages and disadvantages
Adv- Limited liability Increased sources of finance More expertise available Dis- Competitors can view finances Cant sell shares to the general public Shareholders expect dividends in return for their investment into the business
