Business Ownership Structures (yr10) Flashcards
What is the definition of a sole trader ?
Sole trader businesses have just one owner
What is the advantage for a sole trader ?
- They’re easy to set up, which means they’re great for start- up businesses
- be your own boss
- you alone decides what happens to any profit
What is the disadvantage for a sole trader ?
- long hours , may not get a holiday
- unlimited liability - liable ( legally responsible) - might need to sell everything you own if in debt
- unincorporated - business doesn’t have its own legal identity ( if they sue business they’ll sue you personally )
- hard to raise money
examples of a sole trader business
- plumbers
- hairdressers
- news agent
- fishmongers
Definition of a partnership?
- Partnerships generally have between 2 - 20 partners.
- each partner has an equal say in making decisions
- equal share of profits
- unless they have an agreement called a deed of partnership
Advantages of partnerships ?
- more owners = more ideas
- greater range of skills and expertise
- more ppl share the work
- more owners = more capital (money )can be put into business so it can grow faster
Disadvantages of partnerships ?
- each partner is legally responsible for what all the other partners do
- most partnerships have unlimited liability
- more owners = more disagreements( your not the only boss)
- profits are shared between partners
Definition of a private limits company ?
- “ private “ means that shares can only be sold if all the shareholders agree
- the shareholders are often all members of the same family
- private limited companies have ltd after their name
Advantages of ltd ?
Limited liability - you can’t lose more than you invest unlike sole traders and partnerships
Being incorporated- the company can continue trading after a shareholder dies unlike partnerships
Easier for ltd to get a loan or mortgage than it is for a sole trader or partnership
All the shareholders have to agree for someone to buy shares. The owners keep a lot of control over how the business is managed and how many ppl get to share the profits
Definition of public limited company
“Public” means that the company shares are traded on a stock exchanges, and can be bought and sold by anyone.
Public limited company have “PLC “
after their name
Firms often become PLC when wanting to expand
Advantages of PLC
Much more capital can be raised by a PLC than by any other kind of business
That helps the company to expand and diversify
Have the benefits of having limited liability and being incorporated
PLC disadvantages
Hard to get lots of shareholders to agree on how the business is run
Each shareholder has little to say ( unless they own a lot of shares)
It’s easier for someone to buy enough shares to take over the company - if they can convince shareholders to sell
The accounts have to be made public - competitors can see if business is failing
More shareholder = more people wanting a share of the profits
Disadvantages of ltd
More expensive to set up because of all the legal paperwork you have to do
Company is legally obliged to publish its accounts every yeah ( although they don’t have to be public )
What is limited liability
A limited to what you can lose
The most you can lose is the amount you invested
Can’t take personal possessions away
( PLC + PLT)
What is unlimited liability
If a business fails personal possessions can be taken to pay the debts
( partnerships and sole traders )
