Business Ownership Types Flashcards
What organisations are classed as a public sector?
Are owned by local, regional or national government.
They provide services on behalf of the government, funded by taxpayers money.
What organisations are classed as a private sector?
Are owned by private individuals or companies.
The private sector is made up of sole traders, partnerships and limited companies.
What organisations are classed as a voluntary sector?
Non-profit and non- governmental organisations e.g. charities/blue cross.
What are sole traders?
Where the business is owned by just one person.
The owner runs the business, can raise money via bank loans, and may employ any number of people to help.
- The business can trade under the owners name- as long as the name is not registered by someone else.
What are the advantages of being a sole trader?
Easy to set up- the owner has to register as self employed with HMRC does not have to pay registration fees.
- has to make an annual self assessment tax return- account and records are quite straightforward
- the owner is in control and is free to make decisions.
- any profit made after tax is kept by owner
What is the HMRC?
UK’s tax, payments and customs authority
What are the disadvantages of a sole trader?
- unlimited liability for debts
- Risky if business needs a lot of investment
- owners have to use or obtain their own money
- have to make all the decisions
What is a partnership?
Two or more own the business and share the risk and workload.
- draw up a feed of partnership
If no deed is drawn up then the arrangements would be subject to the partnership
Act 1894- all profits are distributed equally.
What are some advantages of partnerships?
-more capital is usually available than with sole trader
-partners can be specific to different parts of the business
-the workload and decision are shared
-are a few legal restrictions
What are some disadvantages of partnerships ?
-each person has to consult on decisions so takes longer
-each decision legally binds them all
What is limited and unlimited liability?
limited - shareholders are only liable for the amount invested in a company.
Unlimited - business owners are personally responsible for all of a business’s debts
What is a Private limited company?
They have limited liability so an investor only loses the initial stake if a company goes bust.
In law, a private limited company is separate from the people who own it so owners aren’t responsible for the companies debt.
The company is spilt up into shares and brought by shareholders. When the shares are not available to the public, it is private.
What are the advantages of a private limited company?
Owner can retain control
More able to raise money
Limited liability
What are the disadvantages of a private limited company?
Must be registered with the Registrar of Companies
Registering has High set-up costs (legal and administrative)
Harder to motivate and control workers as they don’t get a share of the profits
