Business Ownership Flashcards
What is a sole trader? Include examples.
- one person owns the business and makes all the decisions.
- the owner gets to keep all the profits but is also responsible for all debts (unlimited liability).
- eg hairdresser, plumber.
What are the advantages of being a sole trader?
you can be your own boss.
quick and cheap to set up.
you can keep all profits.
you can make all your own decisions.
you can choose your own hours.
What are the disadvantages of being a sole trader?
high workload/pressure.
limited skill set.
unlimited liability.
difficult to access capital.
hard to get time off.
bankruptcy if business fails.
What is a partnership? Include examples.
- two or more people share ownership of the business.
- they share the profits but also share the responsibility for debts (unlimited liability).
- eg law firm or accounting firm.
What are the advantages of a partnership?
easy to set up.
private accounts.
profits belong to partners.
more finance than a sole trader.
shared skills and ideas.
small firm with good relations with workers.
What are the disadvantages of a partnership?
difficult to work together.
unlimited liability.
shortage of capital.
shared profits.
slower decision making.
What are the three types of partnerships?
ordinary partnerships, limited partnerships, limited liability partnerships (LLP).
What is an ordinary partnership?
normally have unlimited liability, a partnership agreement setting out rights and responsibilities, and how profits are allocated.
What is a limited partnership?
at least one partner assumes responsibility for managing the business and has unlimited liability. at least one partner contributes finance, receives a dividend, and has limited liability, but no involvement in running the business.
What is a limited liability partnership (LLP)?
designed for professional partnerships (eg solicitors). at least two partners (designated members) have additional legal responsibilities. financial affairs are not as private as those of general partnerships and must be registered with companies house.
What is a private limited company?
- a small to medium sized business that is usually run by the family or the small group of individuals who own it.
- funded by shares that cannot be sold without the agreement of other shareholders. not sold on the stock exchange.
- unlike public limited companies, share capital may be less than £50,000 although many are much higher.
- tends to be limited in size.
- must have ltd after the name to warn people that its owners have limited liability.
What are the advantages of a private limited company?
- keeps its affairs reasonably private, meaning they can set objectives without pressure from shareholders.
- limited liability.
- status/reputation.
- access to capital.
- continuity if owner dies.
- manages can run it and owners still have control.
What are the disadvantages of a private limited company?
- expensive legal process to set up.
- public financial information.
- corporation tax.
- conflict between owners/managers.
What is a public limited company? Include examples.
- this type of business can sell its shares to the public on the stock market.
- it has limited liability too, but its usually a larger company.
- eg large companies like Tesco or BP.
What are the advantages of a public limited company?
- shares are traded on the stock exchange and available for general public.
- raise large sums of money from shares.
- limited liability.
- positive publicity.
