Types of Business Flashcards
What is the definition of Sole Trader?
A Sole Trader is a small commercial enterprise owned by a single individual.
That individual takes on risks of debts
owed by the business.
In legal terms the business is not considered to be separate from the owner.
If the business was to go bankrupt owing money the sole trader is personally responsible for those debts
What is the definition of a Business Partnership?
Consists of several individuals owning the business together.
The Partners will not necessarily own equal shares in the business as it will depend on the amount of money that they invested in it.
The share of the business owned by each partner will tend to dictate the way that any profits are shared.
The partners will all take on the risks of any debts owed by the business.
What is the definition of a Limited Company?
A separate legal entity.
Known as incorporation.
Owned by shareholders.
Shareholders have limited liability for the debts of the business.
If the company becomes bankrupt shareholders will only lose the value of the shares they have bought they will not be responsible for any other debts owed by the company.
