Business Forms Flashcards
What is an unincorporated business?
The owner is the business- no legal difference.
Most operate as sole traders, some partnerships.
Owners have unlimited liability for business actions.
What is an incorporated business?
Legal difference between the business and the owners.
The company has a separate legal identity.
Owners have limited liability.
Most operate as private limited companies.
What is unlimited liability?
Characteristic of unincorporated businesses.
Business owner(s) is personally responsible for the debts and liability of the business.
If the business fails the owners are liable for the amounts owed.
What is a sole trader?
An individual who owns their business and runs it themselves. They own all the assets t=of the business and is personally responsible for its debts.
Advantages of being a sole trader.
Quick and easy to set up
Simple to run
Owner has complete control over decision making
Minimal paperwork
east to close/shut down
Disadvantages of being a sole trader.
Unlimited liability
Harder to raise finance- limited funds and need security for loans
The business is the owner so the business suffers if the owner is ill
Can pay higher rates of tax than companies.
