organisational forms Flashcards
partnerships
2-20 people in business together with the intention of making a profit
benefits of a partnership
+easy to set up
+partners can agree on own arrangements for financial management decisions and if they wish to dissolve
why are partnerships used?
having more partners= more capital, more skills, more contacts and the responsibility is shared out
how are partnerships shown in SOFP
capital contributions of EACH partner
how are partnerships shown in income statement
appropriation account
problems with partnerships
- control diluted
- disputes
- profits must be shared
- unlimited liability, may have to settle debts with own assets
limited companies
artificial legal person, capital divided into shares, owners are members or shareholders, perpetual life, limited liability
types of limited companies
public limited company (plc)
private limited company (ltd)
plc
offer shares to general public, must have two shareholders, an AGM, only start trading with £50,000 capital
ltd
cannot offer shares to public, can have one or more shareholders
benefits of limited companies
+large amounts of capital raised
+legal identity
+delegation of management function
+perpetual succession
disadvantages if limited companies
-strict legal control
-publicity
-delegation of management function
shareholders
receive profits through dividends which are paid out of revenue reserves
corporate governance
gives investors confidence that business is financially sound
business risk
industry-specific, variation for size and diversity
