LLC's, sole traders & share capital Flashcards
What is a sole trader? And it’s disadvantages?
What it is? A business owned & managed by one individual with a few employees while the singular owner takes all the risk.
Disadvantages: Resource dependent on one owner. It also has unlimited liability.
What is a Limited liability Company and how is it formed
What is it? It’s a company set up by one or more people and applies the separate entity concept thus can form contracts, sue/ get sued and the company pays it’s own tax on profit.
Formation: Incorporation
What are Ordinary Shares. How are they authorised and issued?
1) O.S: Capital of an LLC, O.Shareholders are the owners and spread ownership with other investors.
2) Authorisation of share capital: Max number of O.S’s issued after predetermined nominal value(current price).
3) Issued share capital: Number of o.s’s that can be issued to be bought and sold.
What are the four types of financing?
1) O.S: Investors own a part of the company and recieve dividends.
2) Preference Shares: Debt financing(still a share) where it’s dividents are paid out before ordinary dividends.(like an o.s but better)
3) Debentures & bonds: Debt financing secured on credit worthiness/ collatoral(respectfully)
4) Bank loans & overdrafts.
Directors of LLC’s
Picked by O.Shareholders to run the company on their behalf. Directors report to the shareholders at Annual General Meeting(AGM) using financial statements.
What are dividends?
When profit is made it could be re-invested as retained profits/earnings or paid out to investors as dividendes(experessed as an amount per o.s, authorised by o.shareholders & paid in the year recognised)
