Liability And Finance Flashcards
What is unlimited liability?
Responsible for paying off all of the debts personally if the company can’t make its payments
What is limited liability?
The legal duty to pay debts run up by a business stays with the business itself, not its owner/ shareholders
Types of businesses that have unlimited liability
- Sole traders
- Partnerships
Types of businesses with limited liability
- Private limited company (LTD)
- Public limited company (PLC)
Finance appropriate for unlimited liability businesses
- Owners capital
- Loan or overdraft
- Leasing
- Trade credit
Finance appropriate for limited liability businesses
- Share capital
- Bank finance
- Angel or venture capital investment
- Peer to peer funding
- Leasing and trade credit
What is equity finance?
When you raise finance through selling shares or control of your business
Disadvantages of selling shares
- Ownership is diluted (lose control)
- Profits are shared with all shareholders
- Investors could lose their money if business fails
What is autonomy?
When an entrepreneur/ business is the only one making decisions
What is liability?
Something that you owe
What is debt finance?
When a business raises money by borrowing
What is an asset?
Something that you own
What is a creditor?
Those owed money by a business
What is a sole trader?
A one person business with unlimited liability
What are partnerships?
When two or more people start a business without forming a company
