1.5 Entrepreneurs and Leaders Flashcards
How many owners are there within a sole trader and what do they do with the profit?
One owner
They keep the profit
What is in the dead of partnerships?
Set out the terms of a partnership, states how much capital each partner has invested and what role each partner will have
Factors of a partnership agreement
- Profit sharing
- Entitlement to receive salaries and other benefits
- Capital invested in the partnership
- Arrangements for the introduction of new partners
- Arrangements for retiring partners
- What happens when the partnership is dissolved
What is a limited partner?
A partner who is limited to the amount of investment they have made in the partnership
What is a nominal partner?
People who allow their names to be used for the benefit of a partnership, usually for remuneration, but they don’t get a share of the partnerships profits
What is included in a memorandum of association?
Names of all the people who were there at the founding points of the company and the articles of association (set of rules that govern how the company is run)
What is included in the articles of association?
- Outline for managerial and administrative structure
- Responsibilities of a business
- Information on the rights of shareholders
What is the divorce of ownership from control?
It happens when an owner of a business doesn’t control or get involved in the day-to-day decisions of the business
What are royalties?
Amount paid by a third-party to an owner of a product or patent for the use of a product
Advantages of a sole trader
- easy and inexpensive to set up
- The owner has complete control over the business
- All profits belong to the owner
- Simple tax arrangements
Disadvantages of sole traders
- Unlimited liability, meaning the owner is personally responsible for any debts, the business gains
- Limited access to finance and capital
- Limited skill sets
Partnership advantages
- Easy to set up an inexpensive
- Shared responsibilities and decision, making
- More skills and knowledge are available
- Increase access to finance and capital
Disadvantages of a partnership
- Unlimited liability
- Potential for disputes between partners
- Profits off and shared equally, regardless of a contribution
- Difficult to transfer ownership
LTD advantages
- Limited liability, owners aren’t responsible for the company debt
- Access to greater finance and capital
- Easier to transfer ownership
- Protection of a company name
- New shareholders and investors can be easily introduced
-Lower taxation
LTD disadvantages
- More expensive and time-consuming to set up
- More complex legal requirements and regulations then sole traders
- Annual financial reporting and auditing are required
- Shareholders have a little control over the company as the founder usually imposes their agenda
