BUAW 1 Flashcards
Sole trader - 3 characteristics & Financial statements
-Capital into business
-ownership= full profit , full expenses
-unlimited liability
not make annual returns to CH, BUT tax returns and VAT (if registered)
Partnership - 3 characteristics & Financial statements
- share profits in accordance to legislation
- share expertise
-capital
not make annual returns to CH, but Tax returns and VAT
Partnership agreement
cover
- division of profits
-salaries/commissions
-interest of drawings
interest on partners capital
Good Will
Difference of the value of the business as a whole, and the net of its assets and liabilities.
When a partner retires…
partner paid their share based on goodwill
capital and profit due back
Always a change in partnership agreement
When there is a new partner
join if all partners agree, and “buy in” charged a premium for there share of the goodwill at the time. = As they will receive the benefit of the profits, established from previous partners.
Always a change in partnership agreement
LLP - Limited liability partnership
owners are members
submit to CH
The difference to LLP and limited partnership
In a limited partnership, a partner cannot be a general partner (responsible day to day) and a partner.
requirements to be a PLC = Public limited company
more than £50,000 share capital
at least 2 members and directors
requirements of Ltd - private limited liability
atleast 1 member
atleast 1 director- who can be the same as a sole shareholder
=shares not traded publicly.
Benefits of becoming incorporated
- separate entity
-more desirable to investments/easy to finance
-limited
transfer of ownership
Disadvantages of becoming incorporated
- complex requirements to set up
-cost associated - competitors see financials
who owns and funds NFO’S
Owned by the central/local government and is funded by taxes
What can charities do and how do they work (4 points)
- run by trustees
-public interest
-do not take a profit
-follow charity laws (charities act 2011 & charity commission)
Features of a business (4)
-structure
-common objectives and team working
-Co-operation
-responsibility, authority and division of work
4 ways to differentiate a service business to manufacturing
-intangibility=service no touch
-perishability= unused service not for future use
-inseparability= consumed at the time provided
-variability= a service tailored to the needs of the customer
Funding sources
-borrowing
-retained earnings
-working capital (between current assets and liabilities, as things bought things are sold)
-capital
Risk averse
not willing to take risks
risk seeking
seek riskier options for a higher return
risk neutral
accept some risk
How much risk shareholders would take(3)
risk threshold
risk tolerance
risk-appetite
risk-appetite
level of risk willing to accept
risk threshold
the level up to that the risk is acceptable (money lost if all failed)
risk tolerance
the level the business can withstand
difference in limited liability partnership and limited partnership
A limited partnership is formed and regulated under the Limited Partnership Act (2000). It has one or more partners that have unlimited liability, and one or more partners that have limited liability. The partner with limited liability can’t take part in the management of the business.
to purchase property as a partnership- you have to be sep identity therefore only if your limited partnerships.
