Business Ownership Flashcards
What is limited liability
The level of risk is limited to the amount of money that has been invested in the business or promised as investment
What does incorporated mean
A business that is registered as a company, so the business and the owners are separate in the eyes of the law
What does unlimited liability mean
The level of risk goes beyond the amount invested, so the personal assets of the business owner can be used to pay off the business’s debts
What is a sole trader
A type of unincorporated business that is owned by just one person
What is a partnership
A business that is owned by a group of two or more people who share the financial risk, the decision-making and the profits
What is a deed of partnership
A legal document that defines the terms of a partnership
What is a private limited company
An incorporated business that is owned by and earns funds from shareholders, shares are not listed on the stock exchange
What are shareholders
Investors who are the part-owners of a company. They invest in the business in return for a share of the profits and voting rights at the AGM
What is a Franchise
When one business gives another business permission to trade using its name and products in return for a fee and share of its profits
What is a franchisor
An established business that gives permission to an entrepreneur to trade using its name and products
What is a franchisee
An entrepreneur who pays a fee to trade using the named and products of an established business
Advantages and disadvantages of sole traders?
Make own decisions, keep all profits, minimal paperwork
Unlimited liability, heavy workload, difficult to raise finance, may not have all skills needed for different areas of business
Advantages and disadvantages of partnerships?
Less workload, sharing stress and responsibilities, shared liability, bigger investment
Decision making takes longer, shared profits, live with decisions of others, short life (if one partner leaves/dies or partnership ends)
What are limited companies
A business with a separate legal identity from its owners, finances separated form personal finance, owners are shareholders and receive profits from a dividends, run by a board of directors appointed by chair-holders and shares are sold on stock markets
Advantages and disadvantages of Pvt.Ltd
Limited liability, easier to raise finance, original owners are likely to retain control
Shareholders must agree on profit distribution, directors legal duties are stricter, less privacy (public disclosure of company informations but not as extreme as for a plc), finance limited to friends and family
