business structures Flashcards
Sole trader
Def
Advantages
Self-employed and runs business as an individuals
Easy to start and finish - only have to register for VAT and self-employment
I get to make all the decisions
All profits to me
Privacy - only have to share to relevant authorities need to know - eg Tax purposes
Often lower taxes / rates
Less paperwork
can be easier to change to a partnership/company
Sole trader
Disadvantages
Personal liability, all debt is on me, can = bankrupt
Harder to get bank loads
Public perception as some feel they trust bigger companies more and the higher protection they get
Heavy personal commitment, sick days etc
Partnership
Def
Advantages
Partner and be share business
Ability to raise funds increase
Employees may be more attracted to business if given the incentive to become a partner
With partners = bigger skill set
Partnership
Disadvantage
Jointly liable for actions of the other partner
Profits are shared
Share decisions = disagreements
Limited life = as partner can withdraw / die
Partnership Act
Partnership Act 1890 - to protect both partners
Limited Liable Partnership
Advantages
Ability to raise funds increase
Employees may be more attracted to business if given the incentive to become a partner
With partners = bigger skill set
+ limited liability
can continue after partner death
Limited Liable Partnership
Disadvantages
Jointly liable for actions of the other partner
Profits are shared
Share decisions = disagreements
+ Subject to registration procedures with Registrar of company
+ more administration
Limited liability Partnership Act
Limited liability Partnership Act 2000
Company
Def
Advantages
Type of business with separate legal entity from owner
Increased protection in limited liability
Protection of company name
New shareholders can be easily introduction
Easier to get bank loans
Better pension schemes
Company
Disadvantages
increased set up cost
complex accounts and restrictive rules
time consuming
costly - accountants and bookkeepers etc
