2.1 Business Ownership Flashcards
What is a sole trader
Business which is fully owned by one person who has complete control over how firm is run
Advantages of Sole Traders
Low Start-up costs
All Profits Kept
Better Control
Financial Privacy
Disadvantages of Sole Traders
Unlimited Liability
Lack of Capital
Long Hours
Lack of Continuity
Lack of Expertise
What is a partnership
partnership is 2-20 people forming a business together
What is a partnership agreement
A document that clear up potential arguments by talking about
Trading name and function of business
amount of capital each partner invests
Profit ratio
Sonority and control over business
Rules on admitting new partners
Rules on ending the partnership
Advantages of partnerships
Low start-up costs
Shared workload
Specialisation
Raising Capital
Financial Privacy
More effective decision making
Disadvantages of partnerships
Loss of Autonomy
Conflict between partners
Unlimited Liability
Lack of Continuity
Lack of capital
What is a limited company
Owned by shareholders who have limited liability
What are the two essential documents required to form a limited company
Memorandum of association
Articles of association
What is a memorandum of association
Official name of company (PLC or LTD) work and objectives of company, amount of initial share capital and names of original shareholders
What is the articles of association
regulations that cover areas such as voting rights associated with different types of share, rules of board meetings, how profits will be divided and duties of directors
What is a private limited company
a LTD is a limited company that cannot be bought by members of public
Advantages of private limited companies
Raising Capital
Limited Liability
Continuity
Control
Disadvantages of private Limited Companies
Sharing of Profits
Lack of privacy
Set up costs
Limit on capital
What is a public limited company
A PLC is a separate legal entity from its owners. Shares can be bought from members of general public
