LLC's, sole traders & share capital Flashcards

1
Q

What is a sole trader? And it’s disadvantages?

A

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.

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2
Q

What is a Limited liability Company and how is it formed

A

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

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3
Q

What are Ordinary Shares. How are they authorised and issued?

A

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.

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4
Q

What are the four types of financing?

A

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.

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5
Q

Directors of LLC’s

A

Picked by O.Shareholders to run the company on their behalf. Directors report to the shareholders at Annual General Meeting(AGM) using financial statements.

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6
Q

What are dividends?

A

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)

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