Business Structures Flashcards

1
Q

What is Limited Liability

A

The Shareholders of the company are not responsible for the debts of the entity should it fail. Personal assets will not be sold to repay the entities debts.
Note: Directors can be personally pursued for business debts if they act inappropriately.

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2
Q

What is Unlimited Liability

A

Unlimited Liability is where owners of the business could be responsible for the debts of the business should it fail. Personal assets may be sold to repay the entities debts.

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3
Q

What is the difference between Business Entities and Incorporated Entities

A

Incorporated Organisations:

  • Members are NOT Owners
  • Profits are not distributed to members
  • Accumulated funds for future NOT Equity of owner
  • No drawings
  • Fundraising for raising cash
  • If closes down funds not distributed to members
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4
Q

What are two advantages of a Sole Trader

A

Advantages:

  • All profits for the owner
  • Flexible work hours
  • Own Boss
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5
Q

What are two advantages of a Partnership

A

Advantages:

  • Greater access to capital than Sole Trader
  • Shares risk, skill and workload
  • Partners liable for tax on profit as opposed to a company which is taxed on profits and shareholders taxed on dividends.
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6
Q

What are two advantages of a Limited Liability Company

A

Advantages:

  • Limited Liability
  • Can borrow by the way of debentures
  • Has perpetual succession
  • Separation of ownership from day to day management of business
  • Large amounts of capital can be raised through shares/debentures
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7
Q

What are two disadvantages of a Sole Trader

A

Disadvantages:

  • Owner takes all responsibility/risk
  • Limited access to funds for expansion
  • Unlimited Liability
  • Operating problems when owner is sick or on holiday
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8
Q

What are two disadvantages of a Partnership

A

Disadvantages:

  • Share profits
  • Unlimited Liability
  • Limited life, on death or a partner the partnership dissolves
  • Partners have joint and several liability, therefore one partners actions can bind the others
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9
Q

What are two disadvantages of a Limited Liability Business

A

Disadvantages:

  • Expensive set up costs
  • Strict legal/reporting requirements
  • Company profits are taxed and the shareholders dividends are also taxed (double taxation)
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10
Q

State 2-3 sources of finance for a Sole Trader

A
  • Capital (Owners)
  • Revenue from sales of a good or service
  • Accounts payable
  • Loans from the banks
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11
Q

State 2-3 sources of finance for an Unincorporated Organisation

A
  • Membership subscriptions
  • Fundraising
  • Donations
  • Loans from the bank
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12
Q

State 2-3 sources of finance for an Incorporated Oraganisation

A
  • Membership subscriptions
  • Fund raising
  • Donations
  • Grants
  • Loans from the bank
  • Debentures
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13
Q

State 2-3 sources of finance for a Partnership

A
  • Partners Capital
  • Accounts Payable
  • Revenue from sale of goods or service
  • Advance form partners
  • Loans from banks
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14
Q

State 2-3 sources of finance for a Limited Liability Company

A
  • Share capital
  • Revenue from sales of goods or service
  • Accounts payable
  • Loans
  • Debentures
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15
Q

Which two entities must have their financial statements audited

A
  • Limited Liabilities Companies
  • Incorporated Organisations
  • This is a disadvantages as it costs more money for an audit
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16
Q

What is the lifetime of a Sole Trader

A

Finishes when owner dies or business is winds up

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17
Q

What is the lifetime of a Partnership

A

Finishes when a partner dies or the partnership resolves

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18
Q

What is the lifetime of a Limited Liability Company

A

Infinite. Going concern

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19
Q

What is the lifetime of an Incorporated Organisation

A

Indefinite. Continues even though members come and go

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20
Q

What is the lifetime of an Unincorporated Organisation

A

Indefinite. Continues even though members come and go

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21
Q

What are two advantages of an Incorporated Organisation

A
  • Limited Liability
  • ## Unlimited Lifetime
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22
Q

What is Unlimited Liability

A

Unlimited Liability is where owners of the business could be responsible for the debts of the business should it fail. Personal assets may be sold to repay the entities debts.

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23
Q

What is the difference between Business Entities and Incorporated Entities

A

Incorporated Organisations:

  • Members are NOT Owners
  • Profits are not distributed to members
  • Accumulated funds for future NOT Equity of owner
  • No drawings
  • Fundraising for raising cash
  • If closes down funds not distributed to members
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24
Q

What are two advantages of a Sole Trader

A

Advantages:

  • All profits for the owner
  • Flexible work hours
  • Own Boss
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25
Q

What are two advantages of a Partnership

A

Advantages:

  • Greater access to capital than Sole Trader
  • Shares risk, skill and workload
  • Partners liable for tax on profit as opposed to a company which is taxed on profits and shareholders taxed on dividends.
26
Q

What are two advantages of a Limited Liability Company

A

Advantages:

  • Limited Liability
  • Can borrow by the way of debentures
  • Has perpetual succession
  • Separation of ownership from day to day management of business
  • Large amounts of capital can be raised through shares/debentures
27
Q

What are two disadvantages of a Sole Trader

A

Disadvantages:

  • Owner takes all responsibility/risk
  • Limited access to funds for expansion
  • Unlimited Liability
  • Operating problems when owner is sick or on holiday
28
Q

What are two disadvantages of a Partnership

A

Disadvantages:

  • Share profits
  • Unlimited Liability
  • Limited life, on death or a partner the partnership dissolves
  • Partners have joint and several liability, therefore one partners actions can bind the others
29
Q

What are two disadvantages of a Limited Liability Business

A

Disadvantages:

  • Expensive set up costs
  • Strict legal/reporting requirements
  • Company profits are taxed and the shareholders dividends are also taxed (double taxation)
30
Q

State 2-3 sources of finance for a Sole Trader

A
  • Capital (Owners)
  • Revenue from sales of a good or service
  • Accounts payable
  • Loans from the banks
31
Q

State 2-3 sources of finance for an Unincorporated Organisation

A
  • Membership subscriptions
  • Fundraising
  • Donations
  • Loans from the bank
32
Q

State 2-3 sources of finance for an Incorporated Oraganisation

A
  • Membership subscriptions
  • Fund raising
  • Donations
  • Grants
  • Loans from the bank
  • Debentures
33
Q

State 2-3 sources of finance for a Partnership

A
  • Partners Capital
  • Accounts Payable
  • Revenue from sale of goods or service
  • Advance form partners
  • Loans from banks
34
Q

State 2-3 sources of finance for a Limited Liability Company

A
  • Share capital
  • Revenue from sales of goods or service
  • Accounts payable
  • Loans
  • Debentures
35
Q

Which two entities must have their financial statements audited

A
  • Limited Liabilities Companies
  • Incorporated Organisations
  • This is a disadvantages as it costs more money for an audit
36
Q

What is the lifetime of a Sole Trader

A

Finishes when owner dies or business is winds up

37
Q

What is the lifetime of a Partnership

A

Finishes when a partner dies or the partnership resolves

38
Q

What is the lifetime of a Limited Liability Company

A

Infinite. Going concern

39
Q

What is the lifetime of an Incorporated Organisation

A

Indefinite. Continues even though members come and go

40
Q

What is the lifetime of an Unincorporated Organisation

A

Indefinite. Continues even though members come and go

41
Q

What are two advantages of an Incorporated Organisation

A
  • Limited Liability
  • ## Unlimited Lifetime
42
Q

What is Unlimited Liability

A

Unlimited Liability is where owners of the business could be responsible for the debts of the business should it fail. Personal assets may be sold to repay the entities debts.

43
Q

What is the difference between Business Entities and Incorporated Entities

A

Incorporated Organisations:

  • Members are NOT Owners
  • Profits are not distributed to members
  • Accumulated funds for future NOT Equity of owner
  • No drawings
  • Fundraising for raising cash
  • If closes down funds not distributed to members
44
Q

What are two advantages of a Sole Trader

A

Advantages:

  • All profits for the owner
  • Flexible work hours
  • Own Boss
45
Q

What are two advantages of a Partnership

A

Advantages:

  • Greater access to capital than Sole Trader
  • Shares risk, skill and workload
  • Partners liable for tax on profit as opposed to a company which is taxed on profits and shareholders taxed on dividends.
46
Q

What are two advantages of a Limited Liability Company

A

Advantages:

  • Limited Liability
  • Can borrow by the way of debentures
  • Has perpetual succession
  • Separation of ownership from day to day management of business
  • Large amounts of capital can be raised through shares/debentures
47
Q

What are two disadvantages of a Sole Trader

A

Disadvantages:

  • Owner takes all responsibility/risk
  • Limited access to funds for expansion
  • Unlimited Liability
  • Operating problems when owner is sick or on holiday
48
Q

What are two disadvantages of a Partnership

A

Disadvantages:

  • Share profits
  • Unlimited Liability
  • Limited life, on death or a partner the partnership dissolves
  • Partners have joint and several liability, therefore one partners actions can bind the others
49
Q

What are two disadvantages of a Limited Liability Business

A

Disadvantages:

  • Expensive set up costs
  • Strict legal/reporting requirements
  • Company profits are taxed and the shareholders dividends are also taxed (double taxation)
50
Q

State 2-3 sources of finance for a Sole Trader

A
  • Capital (Owners)
  • Revenue from sales of a good or service
  • Accounts payable
  • Loans from the banks
51
Q

State 2-3 sources of finance for an Unincorporated Organisation

A
  • Membership subscriptions
  • Fundraising
  • Donations
  • Loans from the bank
52
Q

State 2-3 sources of finance for an Incorporated Oraganisation

A
  • Membership subscriptions
  • Fund raising
  • Donations
  • Grants
  • Loans from the bank
  • Debentures
53
Q

State 2-3 sources of finance for a Partnership

A
  • Partners Capital
  • Accounts Payable
  • Revenue from sale of goods or service
  • Advance form partners
  • Loans from banks
54
Q

State 2-3 sources of finance for a Limited Liability Company

A
  • Share capital
  • Revenue from sales of goods or service
  • Accounts payable
  • Loans
  • Debentures
55
Q

Which two entities must have their financial statements audited

A
  • Limited Liabilities Companies
  • Incorporated Organisations
  • This is a disadvantages as it costs more money for an audit
56
Q

What is the lifetime of a Sole Trader

A

Finishes when owner dies or business is winds up

57
Q

What is the lifetime of a Partnership

A

Finishes when a partner dies or the partnership resolves

58
Q

What is the lifetime of a Limited Liability Company

A

Infinite. Going concern

59
Q

What is the lifetime of an Incorporated Organisation

A

Indefinite. Continues even though members come and go

60
Q

What is the lifetime of an Unincorporated Organisation

A

Indefinite. Continues even though members come and go

61
Q

What are two advantages of an Incorporated Organisation

A
  • Limited Liability

- Unlimited Lifetime