Business Structures Flashcards
What is limited liability
The shareholders of the company are not responsible for the debts for entities should it fail. Personal assets will not be sold to repay the entity debts.
What is unlimited liability
The owners of the business could be responsible for the debt of the entity should it fail. Personal assets maybe sold to repay the entity’s debts
What is the difference between business entities and incorporated entities
Incorporated
・Members are not owners
・Profits are not distributed to members
・Accumulated funds for the future not equity of the owner
・No drawings
・Fundraising for raising cash
・It closes down funds, not distributed to members
What is two advantages of a Sole Trader
・All profits for the owner
・Flexible working hours
・Own boss
What is two advantages of a Partnership
・Greater access capital than to Sole Propitiator
・sharing skills, risk, work loads
・Partners liable for tax on profit as opposed to a company which is taxed on profits and shareholders taxed on dividends
What is two advantages of a Limited Liability Company
・All shareholders have limited liability
・A large number of people can purchase the shares
・Additional shares can be issued in order to raise capital and expand the company
What are two disadvantages of Sole Trader
・Owner takes all responsibility/risk
・Limited access to funds
What are two disadvantages of Partnership
-Share profits
Partners have joint and several liability, therefore one partner’s action can blind all other partners
-Unlimited liability
-Limited life on the death or retirement of a partner, the partnership is dissolved
What are two disadvantages of Limited Liability Company
- Legal issues when being establishing
- Cannot sell shares to public
- Public is able to view accounts
- Difficult to transfer shares, all shareholders have to agree
Which two entities must have their financial statements audited?
- Limited liability companies
- Incorporated organisations
- This is a disadvantage as it costs more money for an adult
State 2-3 sources of finance for a Sole Trader
- Capital - Owners
- Revenue from sale of goods/services
- Accounts payable
- Loans from the bank
State 2-3 sources of finance for a Partnership
- Partners Capital
- Revenue from sale of goods/services
- Accounts payable
- Advance from partner
- Loans from the bank
State 2-3 sources of finance for a Limited Liability Company
- Share capital
- Revenue from sale of goods/services
- Accounts payable
- Loans from the bank
- Debentures
State 2-3 sources of finance for an Incorporated Organisation
- Fundraising
- Subscriptions
- Debentures
- loans
What is the lifetime of a Sole Trader
Limited
