Types Of Business Flashcards
Whats a sole trader?
Simplest form whereby there is one owner - unincorporated because the business doesn’t exist as its own right
3 advantages of a sole trader
1) no need for sole trader to consult with anyone before making a decision
2) sole trader keeps al profits after tax
3) financial state of business can be kept private
What are 3 disadvantages of a sole trader?
1) owner is the business and is fully responsible for all debts
2) sole trader responsible for al duties, eg finance, HR
3) hard to raise finance for expansion bc of risk
Whats a partnership?
When two or more people run a business together (partners)
Advantages of a partnership?
1) easy to establish
2) risk, work and losses are shared
3) partners can specialise in what they do
What are the disadvantages of a partnership?
1) unlimited liability partners liable for any debts
2) decision making slower and e risk of conflict
3) losses shared but so are profits
Whats a private limited company (ltd)
A business owned by its shareholders, run by directors and has limited liability
What are the advantages of a ltd?
1) limited liability encourages people to invest
2) easer access to large amounts of capital through the ability to issue shares —> inc growth
3) assumed to be less risky by investors and banks
What is a public limited company (plc)
Larger than private limited, shares can be sold on stock market, can be taken over if investor gains 51% of shares, required share capital of 50,000
What are the disadvantages of a limited company?
1) public disclosure of company accounts - hard to keep financial info hidden from comp
2) plc greater threat of takeover
What are the advantages of operating as a public limited company?
1) access to large amounts of capital due to being able to issue shares
2) limited liability for shareholders encourages people to invest
3) investors view as less risky than sole trader or partnership - better terms for borrowing
