Types Of Business Ownership(excluding franchises, co ops and public corporations) Flashcards
What are the advantages of being a sole trader?
> easy to set up
you are your own boss
you alone decides what happens to the profits
What are the disadvantages of being a sole trader?
> long hours
unlimited liability
they are unincorporated (the business isn’t legally separate from the owner)
What is a partnership?
2-20 owners. All owners have an equal share of the business unless they have a deed of partnership that says otherwise.
What are the advantages of a partnership?
> more ideas. Can share the work
> more capital
What are the disadvantages of a partnership?
> each partner is legally responsible for what the other partners do.
unincorporated and have limited liability
more disagreements. Longer decision making
What is the advantage of setting up a limited company?
Adv- less financial risk
Disadv- more expensive to set up
What are the 5 differences of setting up a limited company compared to sole traders and partnerships?
1) the business in incorporated.
2) limited liability.
3) must have a memorandum of association ( tells the world who the business is and where is it based.
4) must have an article of association (sets out how the business will be run).
5) owned by shareholders. More shares you own, the more control you get.
What is a sole trader?
A business owned by one person and mostly small businesses
What is a private limited company?
(Ltd) A business owned by shareholders. Shareholders are usually family members.
What are the advantages of becoming a private limited company?
> limited liability
> incoporated
What are the disadvantages of becoming a private limited company?
> more expensive to set up because of all the legal paperwork.
the company is legally obliged to publish its accounts annually
What is a public limited company?
(Plc) A company where shares are sold on the stock exchange (can be bought by anyone). Firms usually become PLC’s when they want to expand
What are the advantages of becoming a public limited company?
> more capital can be raised than other kinds of businesses
> helps the company expand and diversify
What are the disadvantages of becoming a public limited company?
> each shareholder has little say unless they own a lot of shares
it is easy for someone to buy loads of shares and take over the business
hard the sacrifice profit for other objectives like the environment because there are many shareholders that need to make a general agreement
