Types of Business Ownerships Flashcards
What are some reasons why people start businesses?
Income Rental
To satisfy a demand
To create employment
List some types of business ownerships?
- The sole trader
2.Partnership
3.Companies
4.Unlimited Liability Companies
5.Limited liability Companies
What is a sole trader?
The sole trader is a single business owner, who has to make all the decisions for the company.
What is a Partnership?
A partnership business is formed legally by a minimum of two and a maximum of twenty persons in a business.
Companies?
A company is a separate legal entity from its owners, known as shareholders.
What are Unlimited liability Companies?
An unlimited company is one where the owners’ or investors’ liabilities are not limited to their contributions, meaning they could face unlimited losses.
What are limited liability companies?
This is a company where shareholders are protected whereas they cannot take the fault for personal assets.
Two types of liability companies?
Public Limited Company
Private limited Company
What is Private limited Compaines?
Only allows friends, relatives and coworkers to purchase shares of the comapny and become a part of the company.
What is Public limited Companies?
Public liability companies allow the public to buy shares, requiring a minimum of 7 members with no limit on the number of shareholders.
Who is a shareholder?
A shareholder is someone who owns shares in a company, giving them a stake in its assets and profits.
Source of Capital for a Sale Trader?
1.Loan & Overdraft from banks
2. Trade Credit
3.Personal Saving
4.Grants & loans from the government
List some source capital for partnership?
- Personal Saving
2.Small Business loan
3.Additional Partners
List some source of capital for a company?
1.Finanical Institution
2.Government Agencies
3.Venture Capital Investors
4. Shares /Equity funding
5. Franchising
List some of the roles of financial institution as a source of capital?
*Increasing the goodwill of the borrowing business in the capital market, thereby allowing the business to easily raise funds from other sources.
*Making funds quickly available even during periods of low performance
What is a financial institution?
It is an establishment that conducts financial transactions such as investment, loans and deposits.
What are some things you need as a sole trader?
*A completed BN1 form
*TRN
*3 passport-size photographs signed by a justice of the peace (JP)
* The registration cost is $2000
To register as a partnership you must submit?
*A completed BN2 form
*Proof of Residental address and TRN
*3 passport-size photographs signed by a justice of the peace (JP)
*The National ID card for each partner
* The registration cost is $2000
To register as a company you must submit?
*registration fee $12000
What are some advantages of sole trader?
*Benefits of operating alone are
*all profits are taken by the owner.
What are some disadvantages of sole trader?
*The sole proprietor must work for long
hours resulting in little time for family.
*There is also limited capital to inject into
the business and he alone bears all the risk
of the business.
What are some advantages of partnership?
*Since more than one person is involved more capital can be raised to inject into the business.
*There is more expertise and work load is shared.
*The risk of the business operation is also shared.
*
What are some disadvantages of partnership?
*All partners will be affected by the action of each partner since each person represents the business.
*Decision making may be very slow if
partners are not in agreement.
*There are high risks for partners who do not have limited liability.
What are some advantages of company?
*It is a separate legal entity from the owners
*You can own property in the name of the company; there is usually limited liability for the shareholders (unless they have given a personal guarantee)
*You may be able to take advantage of tax minimization schemes (legal ones, of course!);
*It can be owned and operated by only one shareholder and director;
*It may make it easier to attract capital investment because of shareholders’ limited liability.
What are some disadvantages of a company?
*They can be complicated and expensive to establish and administer if it is a large company.
*If you are not a sole shareholder, the shares may be difficult to sell.
*If you have only a minority shareholding you may be allowed little or no input into the affairs of the company;
*etc
