Sectors of the Econemy Flashcards
What is a Private Limited Company
A Private Limited Company is owned by 1-50 shareholders.
They cannot sell their sales on the Stockmarket.
Key Features of a Private Limited Company
Private Limited Company can range from 1 to 50 Shareholders.
The owners of the Private Limited Company obtain shares which entitle them to shair profits.
The accounts of Private Limited Company have to be published in a summarised form.
Advantages of a Private Limited Company :
The business benefits from from Limited Liability.
More equity can be raised as there can be 1-50 owners (shareholders).
The company has it’s own legal identity
Disadvantages of a Private Limited Company :
All companies must be registered with the Registar of companies
They have to share their financial information with the final accounts which competitors can see.
Shares cannot be sold to the general public therefore funds may be limited.
A sole trader who becomes a Ltd could lose some control over the business.
What is a Sole Trader ?
When first starting out in business, the chances are that you will set up in business by yourself.
This is called a Sole trader
Key features of a Sole Trader :
A sole Trader is a business owned by one person.
The owner invests capital into the business either from personal savings or a bank loan.
Although there is is only one owner they can have many employees.
Advantages of being a Sole Trader :
The owner keeps keeps all of the profits
The owner makes all the decisions (eg who to employ, where the business will be located).
It is easy to set up
The business affairs are kept private
Disadvantages of being a Sole Trader :
It may be Difficult to obtain finance
There may be a lack of new ideas as a result of working in isolation.
Unlimited Liability - If the business goes bankrupt the owner could lose their own personal possessions (eg their house) in order to cover the debts of the business.
What are Partnerships ?
Partnerships is a business which can have between 2-20 owners.
Although there can be some exceptions.
Advantages of Partnerships :
There is more capital invested compared to a Sole Trader.
There are more ideas compared to Sole Traders
There should be greater expertise
Risks and responsibilities are shared between the partners
Disadvantages of Partnerships :
Profits have to be shared between the partners
There could be disagreements between the partners
The business suffers fr om unlimited liability
The actions of one partner are binding on the others
What is A Public Limited Company
Public Limited Company is a business owned by 2 or more shareholders which can sell it’s shares on the stockmarket.
Key Features of a Public Limited Company
Shares can be sold on the Stock Market
Can have 2 shareholders upwards Shareholders have a right to - receive annual report vote and speak at general meetings and elect the board of directors
Advantages of a Public Limited Company :
More capital can be raised than a private limited company as shares can be sold to the public.
The Business benefits from Limited Liability.
If the business goes bankrupt, then the owners will only lose the money they have invested in the business.
Disadvantages of Public Limited Company
Shares can be transferred easily which may lead to the company being taken over.
The company’s full annual accounts must be published.
The company may become to big and suffer with communication
There could be problems between management and employees
