Businesses in the real world Flashcards
What is a Sole Trader?
Sole Traders are businesses owned by one person. This is the most common form of business ownership in the UK
Advantages of a Sole Trader?
Easy and cheap to set up
Can be set up with very little capita, making it popular for those with little savings
Owner is in complete control of the business and can make decisions without consulting anyone
All profits go only to the sole trader
All financial information about a sole trader is private
Disadvantages of a Sole Trader?
Unlimited liability
If the owner is ill, they will be issues keeping the business operating
Difficult to find money to start the business, because there is only funds of one person
Long work hours, especially when the business is starting, and the business wants to be established
Owner may not have all the skills required to run a business
If the owner dies, the business will cease to exist
What is a Partnership?
A form of ownership that involves at least two partners (20 max), although they may not have an equal share in the business
Advantages of a Partnership?
Easier to raise capita to start or expand the business
Easy to set up
Range of different skills available among two people
Partners can share out work, reducing stress
Financial information does not have to be shared with anyone
Disadvantages of a Partnership?
Profit has to be shared between the partners
Unlimited liability
There may be a shortage of capita if there are few partners in the business
May be disagreements, which can result in decision- making being slower
If one or more partners die, the business is at risk of failing
What is a Private Limited Company (LTD)?
A type of business ownership where the owners of a PLC are called shareholders because each has invested money in the business, and now owns a share. Shares are bought and sold by a family
Advantages of a Private Limited Company?
Limited liability
If a shareholder dies, the business continues to operate
Banks are more likely to lend money to them, as they are more secure than a sole trader or partnership
As shares can only be sold with agreement from the existing shareholders, there is no chance of being taken over by another business
Disadvantages of a Private Limited Company?
Financial information must be public, so open to competitors
Can be complex and expensive to set up and operate
Unable to sell shares to the general public, restricting the amount of capita that can be raised
Dividends have to be paid to shareholders
What are dividends?
Amounts of money paid to shareholders from the profits of the business
What is Limited Liability?
When a business goes into debt, a person can have their personal possesions taken and used as payment, however with limited liability you can only use the amount of money that you invested in the business
What is a Public Limited Company (PLC)?
A form of business ownership where the business can sell it’s shares to the general public through the stock exchange
Advantages of a Public Limited Company?
As shares can be sold to the general public, much more capita can be raised
Easy to borrow money from banks
Limited Liability
What is a customer?
A person who buys a product
What is a consumer?
A person who uses a product
