Business Structures Flashcards
What is Limited Liability?
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. Use members for Incorporated Organisations.
What is Unlimited Liability?
The owners of the business could be responsible for the debts of the entity should it fail. Personal assets may be sold . Use Members for Unincorporated Organisations.
What is the difference between business entities and Incorporated Entities?
Incorporated
Members 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
What is two advantages of a Sole Trader?
All profits to the owner
Flexible working hours
What is two advantages of a Partnership?
Greater access to capital compared to sole trader
Sharing skills, risk, workload etc..
What is two advantages of a Limited Liability Company?
Limited Liability
Large amounts of Capital can be raised through shares/debentures
What are two disadvantages of a Sole Trader?
Owner takes all risk/Liability
Limited access to funds for expansion
What are two disadvantages of a Partnership?
Share Profits
Limited life on the death or retirement of a Partner, the Partnership is disolved
What are two disadvantages of a Limited Liability Company?
Expensive set up costs
Strict legal/reporting requirements
State 2-3 sources of finance for a Sole Trader
Capital- Owners
Revenue from sale of goods/ service
Accounts Payable
Loans from Banks
State 2-3 sources of finance for a Partnership
Partners Capital Revenue from sale of goods/ service Accounts Payable Loans from Banks Advance from Partners
State 2-3 sources of finance for a Limited Liability Company
Debentures Share Capital Revenue from sale of goods/ service Accounts Payable Loans from Banks
State 2-3 sources of finance for a Incorperated Organisations
Funding
Subscriptions
Debentures
Loans
Which two entities must have their financial statements audited?
Limited Liability Companies and Incorporated Organisations
This is a disadvantage as it costs more money for an auditor
What is two advantages of an Incorporated Organisation?
Limited Liability
Unlimited Lifetime
Greater access to funds
