1.5.4 Forms Of Business - Legal Structures Flashcards
What is a business form?
A business form is the legal structure that it takes (in the Uk). It could be a sole trader, a partnership, a private limited company (Ltd) or a public limited company (PLC).
Define limited liability.
Limited liability means that the owner of the business has no personal liability for debts. The owner has a separate legal identity from the business and is NOT liable for payment of the debts from their own personal funds.
What is unlimited liability.
When there is no money in the business to pay of debts or fines, so the owner uses their own personal assets and capital to pay the debts.
What is a sole trader?
A business owned by one owner, but they can take on staff.
What are the advantages of being a sole trader?
-Easy to set up.
-Make decision quickly.
-Less capital needed.
-All profits kept by the owner.
-Can offer personal attention to customers.
-Don’t have to make any information about the company public.
-They are their own boss.
What are the disadvantages of being a sole trader?
-Unlimited liability.
-Difficult to raise money (risky).
-Don’t have economies of scale.
-No-one to take over for lll-health or holidays.
What are partnerships?
Tow or more people who share the risks, costs and responsibilities of being in business.
What are the advantages of a partnership?
-Easier than a sole trader to raise extra capital, as partners all have their own sources of finance.
-Profits goes to partners (motivating).
-Shared problems and decisions.
-Partners contribute with range of skills.
-No need to make public any information.
What are the disadvantages of a partnership?
-Unlimited liability.
-Partners may have disagreements over things such as control and profits etc.
