Business Structures - Sole Trader Flashcards
1
Q
What are the main types of business structures?
A
- sole trader
- partnership
- public limited company
- private limited company
2
Q
What is a sole trader?
A
- business owned by one person
- most small business’ start point
- make all decisions on managing the business
- money raised from own assets or their loans
- has to make self assessed tax payments
- keep your own records showing income/expenses
- keeps all profits
- likely to play all roles in the business
- doesn’t mean they have no employees
- personally reliable for debts, personal assets at risk meaning unlimited liability
3
Q
Advantages of being a sole trader?
A
- quick and easy to set up
- simple to run - owner has control over decisions
- minimal paperwork
- few legal documents
- owners keep all profits if they wish
- mode privacy, no need to publish financial docs
4
Q
What are the disadvantages of being a sole trader?
A
- unlimited liability
- harder to raise finance (limited own funds and hard to get loan)
- business suffers if owner is ill or loses interest
- owners need to look after every area, even the ones they’re not skilled in
- pay more tax than a company
5
Q
What is a partnership?
A
- jointly owned by 2-20 people
- each partner takes share of profits
- each partner has unlimited liability, unless it’s a limited liability partnership or a silent partner
