Business Ownership Factors Flashcards
Legal/administrative requirements
Simpler to start as a sole trader than a limited company. This may influence the type of ownership
Legal status
This will have an influence of ownership as some forms will result in the business having a separate entity
Liability
Business owners must consider the financial risk involved when choosing a form of ownership
Liability for a sole trader
Will result in a higher financial risk due to unlimited liability
Liability for a limited company
Will result in a lower financial rick due to having a separate legal identity
Why would the owners personal situation affect liability?
As an individual without children and a mortgage, they maybe more willing to take the risk
Funding
Some forms of ownership may require more paperwork and legal expense
Funding for a sole trader
Register for tax
Send annual self assessments to HMRC
No legal process they must follow
Funding for a limited company
Merchant bank
Commission fee
Cost of producing prospectus’ and advertising
Annually accounts produced and published
Sole trader to PLC
A business must consider whether they financial outlaws outweighed by the benefits of becoming a PLC as well as the funds to finance it
Control/decision making
The form of ownership will influence the type of control the owner will have
Control/decision making for sole trader
Sole responsibility
Control/decision making for partnership
Discussing decisions among partners
Control/decision making for PLC
Shareholders elect a board of directors but shareholders are the owners and ultimately have direct and control of the business
