Business structures Flashcards
What is limited liability
Shareholders of the company are not responsible for debts of business should it fail. Personal assets will not be sold to repay the entity’s debts.
Directors can be personally pursued for the business depts. use members for incorporated organisations
What is unlimited liability
Owners of the business could be responsible for debts of entity should it fail. Personal assets may be sold to repay the entity’s debts. use members for incorporated organisations
What is the difference between business entities and incorporated entities
Members not owners, profits are not distributed to members, accumulated funds for future not equity of owner, no drawings, fundraising for cash and if closed down funds are not distributed to members.
What are 2 advantages of a sole trader
low cost to set up and own boss and flexible hours
What are 2 advantages of a partnership
Greater access to funds, sharing skills
What are 2 advantages of a limited liability company
limited liability, perpetual succession can borrowdebentures
What are 2 disadvantages of a sole trader
owner takes all responsibility,limited access to funds, unlimited liability
What are 2 disadvantages of a partnership
share profit, have joint liability one partners action can affect all partners, unlimited liability and partnership ends with a partners death
What are 2 disadvantages of a limited liability company
expensive set up, strict legal requirements, profits are taxed must have auditor
State 2-3 types of finance for sole trader
personal funds, dividends
State 2-3 types of finance for a partnership
personal funds, dividends
State 2-3 types of finance for limited liability company
Debentures,loans
State 2-3 types of finance for incorporated organisation
fund raising, subscriptions,debentures and loans
Which 2 entities must have an auditor
limited liability companies and incorporated organisation.This is a disadvantage
What is the lifetime of a sole trader
Stops when sole trader dies
