Business Types Flashcards
How easy is it to start a Sole Trader?
Easy…… Just start doing business
Which two types of business have unlimited liability?
Sole Traders & Partnerships
What sort of paperwork is necessary for a sole trader?
Just contact the taxman at the end of the tax year, giving details of money made
What are the 4 main advantages of partnerships over sole traders?
Larger source of funds.
Can bounce ideas of each other
Easier to take holidays - partner can cover
Illness is not disastrous - partner can cover
What is the main danger of being a partner in a partnership?
You are liable for all the mistakes of your partners. Dangerous, unless you choose your partner wisely.
What exactly does unlimited liability mean?
The owner/s are personally responsible for all debts of the business.
What is the main advantage of forming a company?
You have limited liability. You are not personally responsible for the debts of the business.
When you form a company, you are creating a separate legal entity. What is meant by “separate legal entity”?
The company can be sued in its own right i.e. you can take the company to court, not the owners.
The owners can walk away from problems. (Unless a crime is committed).
Who owns a company?
The shareholders
Who do the shareholders hire to run the business?
Directors
(Of course, they might choose themselves to be the directors).
Why do shareholders invest in a company? 2 reasons
They believe in the potential of the business, and want to enjoy the profits in the future.
And / or they believe the share price will rise and they can sell on at a higher price.
What are the profits of a business called?
dividends
Which sector of the economy are sole traders, partnerships and limited liability companies (both private limited companies and public limited companies)?
The private sector
Why is it called the private sector?
Because it is not owned by the government / the country. It is owned by private individuals.
What is the main difference between private and public companies?
Private limited companies are generally smaller with fewer shareholders.
Only those invited may buy shares in a private limited company, but in a public limited company any member of the public can buy shares.
