Types of businesses Flashcards
What is a sole trader business
A business owned/controlled by one individual
What are the 4 advantages of being a sole trader
1) Easy to set up
2) Privacy on business operation
3) Full Control
4) Recieves all profit
What are the 5 disadvantages of being a sole trader
1)Unlimited liability
2)Lack of capital
3) Full responsiblir=ty
4)Lack of continuity
5)Lack of skills
What is a partnership business
Where 2-20 people share ownership, liability and profit
What is limited liability
Where you invest monet into the business and are not responsible for any loss
What are 3 advantages of a partenership business
1) Easy to set up
2)Partenrs can provide more skills
3)More capital investments
What are 3 disadvantages of a partenerhsip business
- Unlimited liability (items are at risk if business gets bankrupt)
- Conflict
- Lack of capital from bank
- No continuinity
What is a corporation/limited company
A business owned by shareholders that exchange money for shares of the company
What 2 documents need to be submitted for them to be identified and recognized
Memorandum of association and the articles of ascotciation
What does the memorandum of ascociation contain
All info about the business
How do limited companies raise money
By sharing shares
What do the articles of ascociation contain
All rules of the business
What is the benefit of a limited company
- Shareholders have limited liability
- Original owners are still able to keep control
- Continuity
- Easier to raise finance
What are the disadvantages of a limited company
- Legal requirements needd to be filled
- Sharing cannot be transferred and will belong to the person who bought it
- The selling price needs to be agreed upon
After handing in the 2 documents, what do you receive
Certificate of incorparation
