Topic 1 - Business in the real world (2. business ownership) Flashcards
what are the 5 types of business owner ships
sole trader partnerships public limited companies private limited companies not-for-profit
what is a sole trader
someone who sets up a business by themselves, business is owned and managed by the same person however other people cam be employed.
advantages and disadvantages of a sole trader?
A - own boss
- easy to set up - keep all profits - make own decisions
D - unlimited liability
- heavy workload - difficult to take a holiday - may not have all the skills required
what is a partner ship
occurs when 2-20 people join together in a business to pursue a profit
advantages and disadvantages of a partnership
A - share work load
- share skills - more sources of finance - more ideas
D. - disagreements
- unlimited liability - share profit - liable for other actions of partners
what is a deed of partnership
agreement between partners that sets out the rules of the partnership, such as how profits will be divided, so reduces arguments between partners
what are companies
has its own legal identity. it can own items, owe money, sue and be sued. owned by investors who are called shareholders
what are the 2 types of limited companies
private limited company ( ltd )
public limited company ( plc)
what is a private limited company
shares can only be sold if all shareholders agree. shares are all sold privately meaning not on the stock market
advantages and disadvantages of an ltd
A- have limited liability
- company can continue trading after a shareholder dies unlike partnerships
- all shareholders have to agree when other shareholders want to buy shares as it can control how the business is managed
D - more expensive because of all the legal paperwork
- legally obligated to publish all accounts (however don’t have to be made public)
what is a public
limited company
a company that has its own legal identity however er owners cannot control who buys shares (plc)
advantages and disadvantages of a plc
A - more capital can be raised
- helps company to expand and diversify - limited liability
D - shareholders have very little to say unless they own a lot of shares
- easy for anyone to take over the company - accounts have to be made public - more shareholders means there is more people who want shared profits
what are not-for-profit organisations
set up to achieve objectives other than profit. for example charities to help the homeless.
what is unlimited liability
personal possessions of owners are at risk if something goes wrong in the business. There is no limit to the amount of money the owners may have to pay out.
what is limited liability
this is a legal status where a persons financial liability is limited to a fixed sum most commonly the value of a persons investment into a company
