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A-Level Business 📈 > 2.1.3 Limited Liablility 💳 > Flashcards

2.1.3 Limited Liablility 💳 Flashcards

1
Q

What is limited liability?

A

When shareholders are not liable for the debts of the business

This is because in the eye of the law shareholders and the business is seen as separate legal entities

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2
Q

Why are shareholders not responsible for the businesses debt in limited companies ?

A

This is because in the eye of the law shareholders and the business is seen as separate legal entities

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3
Q

What are LTD and PLC

A

Incorporated

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4
Q

What is unlimited liability?

A

When sole traders and partnerships are liable for the debt of the business

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5
Q

What do partnerships have for protection to the business debt ?

A

LLP - have a legal contract for protection

Person who has the most assets has to pay

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6
Q

What are 4 implications of limited liability?

A

Share holders have protection form business debt so business has to pay more

Courts may decide individuals form business are liable if crime is committed

Need adequate records

Owners of small limited companies are required to give personal guarantees of repayments to investors

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7
Q

What are 3 implications of unlimited liability?

A

Exposed financially to the failure of the business

Don’t have money ?- take away the possessions

Liable for any unlawful acts

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8
Q

What are 5 factors that influence the method of finance chosen by business ?

A

Whether it’s shot term or long term - need to know the financial position of the business

Lenders may be reluctant to offer finance - cost of borrowing rises

Types of expenditure - heavy capital ? - need to be funded long term

Cost- business like sources which are cheap

Legal status of business - if limited or unlimited

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9
Q

What is a rights issue ?

A

Issuing new shares to existing shareholders at a discount

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10
Q

What are debentures ?

A

A very high capital loan

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11
Q

What kind of business may use debenture ?

Why?

A

Public limited companies- long term

Debentures to not have any control over the business

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12
Q

What is undercapitalised ?

A

When a source of finance did not raise enough capital when setting up

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13
Q

Is personal savings for a limited or unlimited business ?

A

Unlimited

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14
Q

Is retained profit for a limited or unlimited business ?

A

Unlimited

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15
Q

Is mortgage for a limited or unlimited business ?

A

Unlimited

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16
Q

Is a insecure bank for a limited or unlimited business ?

A

Unlimited

17
Q

Is peer to peer lending for a limited or unlimited business ?

A

Unlimited

18
Q

Is bank overdraft for a limited or unlimited business ?

A

Unlimited

19
Q

Is crowd funding for a limited or unlimited business ?

A

unlimited

20
Q

Why is personal savings unlimited ?

A

It’s for a small business - available

21
Q

Why is retained profit unlimited ?

A

Can be use if business survives and I’d established

But can be restrictive

22
Q

Why is mortgage unlimited ?

A

Long term

But has to be paid back

23
Q

Why is unsecure bank unlimited ?

A

Depends on financial climate at the time

Banks have tight criteria if their is a credit crunch

24
Q

Why is crowd funding unlimited ?

A

Reliable

Owner has to cheap it individually- takes long for considering decision

25
Q

Why is bank over draft unlimited ?

A

Has a limit

May have larger access if a bigger access

26
Q

Why are Grants unlimited?

A

Provides a free source

But have to qualify

27
Q

What is share capital limited ?

A

Capitals remain in the business if trading

But may have rights issues

Cheap and simple and gets good publicity

28
Q

What is debentures limited ?

A

No interest in the business

Long term

29
Q

What is Retained profit limited ?

A

No expectations

Can be used in the future

30
Q

What is business angels investors limited ?

A

Invested in Earlier stage than venture capitalists

Hard to find

A-Level Business 📈 (55 decks)

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