Business ownership Flashcards
What is public limited company (PLC) ?
They sell shares to anyone who wants to buy them
What is private limited company (LTD) ?
They sell shares to only the people that are invited
What is a sole trader ?
A business own by one person
What is Partnership ?
A business owned by 2-20 people
What is the deed of partnership ?
A written agreement
What are the advantages of sole trader ?
- Easy to set up = few forms to complete
- Easy to control = owner makes decisions
- business info can be kept private
What are the disadvantages of being a sole trader ?
- The business stops once owner dies
- Finance = only one person to invest
savings so banks may not lend. - unlimited liability
What are the advantages of Partnership ?
- Easy to set up
- they make decision among themselves.
- No info on profits must be published
- Workload is shared
What are the disadvantages of partnership?
- Disagreements in decision making
- Sharing profit
- new deed of partnership when someone
leaves or joins - few partners to invest = risky
- cannot sell shares to raise finance
- unlimited liability
- fewer partner = more workload
What are the advantages of PLC ?
- business continues shareholders die
- new shareholders can invest = banks lend
money - owners benefit from limited liability
What are the disadvantages of PLC ?
- require legal documents= takes time
- Anybody can buy shares
- public can see information about the
business - Managers are employed to make decisions
What are the advantages of LTD ?
- Shareholders can restrict who buys shares
- Business continues if shareholder dies
- continues if shareholder sells their shares
- New shareholders can invest and banks
are willing to lend - Owners have limited liability
What are the disadvantages of LTD ?
- legal documents which takes time
- Public can see information
- Managers are employed to make decisions
What is limited liability ?
It means business owners are responsible for the debt up to the value of financial investment and businesses belongings are taken.
What is unlimited liability ?
Owner is responsible for all the debt of business and their personal belongings may be taken.
What is the effect of limited liability on owner ?
Shareholders are willing to invest since none of their possessions are at risk to pay off debt
What is the effect of limited liability on business ?
helps raise extra finance to expand as people are willing to invest more as they’re not risking their possessions
What effect does unlimited liability have on owner ?
- owner must pay back all the loan
- if business goes bankrupt, owner has to
sell their assets. - If sales does not rise enough, owners can
be ordered to use their own savings and
sell their personal assets to pay off debt
What effect does unlimited liability have on business ?
- discouragement to set up business
- limit creation of partnership and sole
trader business.
What are other impacts of limited liability ?
complicated since you have to get the legal documents completed and sent to the Registrar of companies.
What are other impacts of unlimited liability ?
Easy to start up sole trader or partnership as legal documents don’t have to be sent to the Registrar of companies
What is sole trade suitable for ?
Start ups that:
- only need a small amount of finance
- have a low financial-risk
- require limited or non-specialist skills
What is Partnership suitable for ?
start-ups and established businesses that:
- need larger amounts of finance
- low financial risk
- wider range of skills
- have owners who want to keep control of
business
What is PLC suitable for ?
Established business that:
- wishes to grow
- needs large amounts of finance
- has a high financial risk
