Businss Ownership Flashcards
What is a private limited company?
A business owned by its shareholders whose shares can’t be freely traded in the stock exchange
Advantages of private limited company
Limited liability
Seperate legal identity - business continues if owner dies
Able to hire experts and specialists to manage it
Many customers prefer this because has a higher status then a sole trader which can help boost sales
Disadvantages of a LTD
Companies are complex to set up - more rules and laws
Can be more expensive to operate business as a company
Somefinancial information is available to anyone who cares to see. May benefit rivals
Selling shares may reduce control OG owners have over the business. May lose control completely.
What is limited liability?
Exists when a business and its owners are legally separate meaning the owner’s personal possessions cannot be sold to pay business debts.
What is unlimited liability?
The personal possessions of the owner of a business are at risk if there are any problems. There isn’t a limit to the amount of money the owners may have to pay out.
Sole trader
Someone who sets up a business on their own
Advantages of being a sole trader
Gets to keep all the profit
Simple, quick and inexpensive to set up
Owner has totals control and makes all the decisions
Disadvantages of being a sole trader
Can be hard work and stressful - make all decisions, manage the business
Unlimited liability
Business ends when the owner dies
What is a partner ship
When two or more people join together in a business enterprise to pursue profit.
Advantages of a partnership
Wider range of skills
May potentially have access to more finance - each partner can contribute funds
Bring different skills and can cover for each other during holidays
Disadvantages of partnerships
Disagreements are common - having different ideas on how to run the business
Profits must be shared
Most partnerships have unlimited liability
Decision making can be slow as all partners are normally consulted
What is a company?
A business that has its own legal identity. It can own items, owe money, sue and be sued.
What is a public limited company
A large business owned by its shareholders whose shares can be sold freely on the stock exchange.
Advantages of PLC
Can sell shares on the stock exchange- easier to raise money when needed
Often receive lots of coverage in media - advertising business and its products
Banks are more willing to lend money to PLC
Disadvantages of PLC
More likely to suffer from adverse publicity in the media
Subject to more laws and regulations then other businesses - expensive
Public companies can be bought by other companies.
