1.5: business forms Flashcards
what is unlimited liability?
the ability to lose more money than was originally invested
what happens if an unlimited liability business has business debts?
they would be forced to sell personal assets to pay off business debts
what liability does a sole trader have?
unlimited liability
what is a sole trader?
a business organisation with a single owner
can sole traders employ people?
yes
what tax do sole traders pay?
income tax and national insurance
what are some advantages of being a sole trader? (3)
- keeping all the profit
- easy to set up
- flexible: owner is in charge of everything
what are some disadvantages of a sole trader? (3)
- the owner has unlimited liability
- its difficult to raise finance
- the business will close upon death of the owner
do sole traders qualify for government help?
yes
what is a partnership?
a business organisation owned by 2-20 people
what is each member of a partnership entitled to?
their share of the business profits
what is a deed of partnership?
covers and explains the rights of each owner (profit, control, responsibility)
why is it smart to set up a deed of partnership?
it outlines what each member is entitled to
what is a sleeping partner?
someone that invests, and takes a cut of the business profits. but they make none of the decisions
what type of liability is a partnership for the partners?
unlimited liability
do not forget: sleeping partners only have limited liability
what are the advantages of partnerships? (3)
- easy to set up
- different partners can specialise in different areas
- partners share the burdem of running
what are the disadvantages of partnerships? (3)
- partners have unlimited liability
- partners have to share the profit
- partners may disagree and fall out
what is the acronym for private limited company?
Ltd.
what determines ownership of a private ltd company?
broken down into a specified number of shares
who can buy shares in a private ltd company?
sold by the owner, to only who they allow (eg. friends, family, venture capitalists)
who makes decisions in a private ltd. company?
the person appointed to run the company (CEO)
what liability is in a private ltd. company?
limited liability
list some advantages of private ltd. companies (2)
- access to greater finance and capital
- professional image and reputation
disadvantages of private ltd. companies (2)
- more expensive and time consuming to setup
- more complex legal requirements and regulations
what do you need to report annually as a private ltd. company?
your financial reports and audits
why would you become a public limited company?
to gain a significant amount of capital
what is the acronym for public limited company?
Plc.
what is the problem with transitioning into a plc?
it is a very complex process with many legal requirements
what is a stock market flotation?
the initial sale of shares, called an initial public offering
what are the risks of a public limited company?
- ownership is spread among a large group
- reduces financial risk
what is the liability of a plc?
limited liability
who can buy shares in a plc?
anyone over 18
what causes a company’s share value to increase?
sales on the stock market (they are very liquid)
how is decision making handled in a plc?
a board of directors, make the decision-making process longer
what is the aim of a lifestyle business?
to maintain a certain lifestyle
advantages of a lifestyle business (2)
- less stress
- choose your own hours
