Business Structures Flashcards
What is Limited Liability
The shareholders of the company are not responsible for the debt of the entity should it fail. Personal assets will not be sold to pay the entities debts. Note: Directors can be personally pursued for business debts if the act inappropriately.
What is Unlimited Liability
Responsible for debts of business should it fail. Personal assets may be sold to repay the entities debts.
What is the Difference Between Business Entities and Incorporated Entities
Owners v Members. In IE profits are not distributed to members. No drawings Accumulated Funds for Future not Equity of Owner
Fundraising Raise Cash IE. If IE shuts down funds are not distributed to owners.
What Are Two Advantages of a sole trader
Minimal Entry Costs and all profits go to owner
Two Advantages of a Partnership
Sharing the Workload between partners and Greater Access to Capital than sole proprieter
Two Advantages of Company
Can’t be responsible for debts of business. Can raise large amounts of capital.
Two Disadvantages of Sole Trader
Difficult to Raise Capital and Unlimited Liability
Two Disadvantages of Partnership
Have to share profits and Unlimited Liability
Two Disadvantages of a Company
Expensive to set up and Strict legal recquirements
2 Types of Finance for Sole Trader
Personal Funds and Loans
2 Types of Finance for Partnership
Personal Funds and Loans
2 Types of Finance Company
Debentures and Loans
2 Types of Finance IE
Fundraising and Loans
Lifetime of Sole Trader
When he dies business ends
Lifetime of Partnership
Partner dies or goes bankrupt
