Business Ownership Flashcards
What are the two types of liability?
- Unlimited liability
- Limited liability
What is unlimited liability?
The owner is entirely responsible for the company’s debt
Personal assets may be taken and sold if the owner cannot pay them off
What is limited liability?
The owner is considered separate from the company and is not responsible for the company’s debt.
What are the people called that a company owes money to if the company has unlimited liability?
Creditors
What are the different types of business ownership?
Sole Trader
Partnership
Private Limited Company (Ltd)
Public Limited Company (Plc)
What is a sole trader?
A business with only one owner
Does a sole trader business have limited or unlimited liability?
Unlimited liability
What organisation does sole trader and partnership companies have to register to?
His Majesty’s Revenue and Customs, collect tax money for the government
What are the advantages of a sole trader business?
Easy to set up
Only have to pay tax on profits the business makes
Can operate more privately
Owner decides what happens to the profits
What are the disadvantages of a sole trader business?
Owner has to work long hours
Owner is responsible for most of the jobs
Company has unlimited liability
What is a partnership?
A business with two or more owners
Does a partnership company have limited or unlimited liability?
Unlimited liability
Define the term ‘deed of partnership’.
A deed that partners of partnership companies agree to that decides who gets what share of the profits
What are the advantages of a partnership business?
More people to share ideas and work
More capital to invest in the company
What are the disadvantages of a partnership business?
Each partner is legally responsible for what all the other partners do
Often have disagreements among partners
When a partner dies, the partnership has to start over
Company has unlimited liability
What organisations do private limited companies have to register to?
Companies House
His Majesty’s Revenue and Customs
Does a private limited company have limited or unlimited liability?
Limited liability
What are owners in a private limited company and a public limited company also known as?
Shareholders
When do private limited companies have to pay tax?
On every monthly wage
What are the advantages of a private limited company?
Seen as more professional than a sole trader company
When a shareholder dies, the company carries on as normal
What are the disadvantages of a private limited company?
The company has to submit their annual accounts to companies house which anyone can view.
More paperwork
Expensive to set up
How can a person buy shares of a private limited company?
The shareholders have to agree to invite a person in
What are the minimum number of shareholders a private limited company can have?
At least two
Do directors of a private limited company need to be shareholders?
No
Does a public limited company have limited or unlimited liability?
Limited liability
Can anyone buy shares of a public limited company?
Yes
Are public limited companies big or small?
Big because lots of people can buy shares at any time and therefore have lots of money coming in for investment
What are the advantages of a public limited company?
When a shareholder dies, the business carries on as normal
The company can expand quickly
What are the disadvantages of a public limited company?
Expensive to set up
Need a certain amount of money to start
A bigger business can easily buy all the shares of the company and take over.
Do shareholders of a public limited company get a say in how the company is run?
No
