3.2 Types of Business Organisations Flashcards
What is a sole trader?
A sole trader is a business that is owned and controlled by one person.
What are the advantages of being a sole trader?
- The owner keeps all the profits.
- The owner is own boss.
- Financial statements remain private.
- Quicker and easier to set up this type of business.
What are the disadvantages of being a sole trader?
- The owner is the only source of capital.
- Long working hours.
- heavy workload.
- unlimited liability.
What is a partnership?
A partnership is a business that is jointly owned uncontrolled by more than one person.
What are the advantages of a partnership?
- more than one source of capital
- shared workload
- partners can specialise
- financial statements remain private.
What are the disadvantages of a partnership?
- Profits have to be shared between the partners
- can be disagreements
- unlimited liability.
What is a limited company?
Unlimited company is a separate legal entity that is owned by shareholders and controlled by executive directors. There are two types of limited companies private and public limited company.
What are dividends?
Dividends are a portion of a company’s earnings distributed to it’s shareholders.
What is an asset?
An asset is anything that is owned by a business such as a vehicle or bank account.
What is the difference between a private and public limited company?
A public limited company (plc) can sell their shares on the stock market unlike a private limited company (Ltd).
What are the advantages of a limited company?
- More capital can be raised by selling shares
- limited liability
What are the disadvantages of a limited company?
- Takes longer and work expensive than a sole trader or partnership.
- More paperwork and additional costs.
- Profits have to be shared with shareholders.
What are owners/Partners capital?
Is money introduced by the existing owner of the business/ new were existing partners.
What is share capital (Ordinary shares)?
Share capital is money invested by shareholders which makes them the owners of a limited company.
What are Debentures?
Debentures are long-term loans to a company from investors that may be secured on the assets of the company. Repaid in full at the agreed date.
What are the Advantages of Debentures?
- No loss of control of the company.
- No repayments due for several years.
- No more interest or payments are needed after the agreed date unlike shares.
What are the disadvantages of Debentures?
- They increase the level of capital gearing.
- they may require security interest is payable.
- Whether the company can afford it or not.
What is a bank loan?
A bank loan is a fixed amount that must be repaid, plus interest over a stated amount of time and equal monthly installments.
What is a mortgage?
The mortgage is a bank loan that is used to buy property on a secured on that property.
What is a bank Overdraft?
A bank overdraft is when the business bank account has a negative balance.
