Understanding Different Business Forms Flashcards
What is a sole trader
When individuals establish and operate a business oh their own.
Advantages of being a sole trader
Easy to start up and manage
Freedom to make their own decisions
Quick decision making
Can be motivating to be your own boss
Get to keep all the profits.
Disadvantages of being a sole trader
Pressure of all responsibility and everything that goes wrong
Hours may be quite demanding
Don’t have cover if sick
Have unlimited liability
What is a private limited company
They are generally smaller than public limited companies, and are relatively cheap to set up. They have Ltd after its name.
Advantages of being a private limited company
Limited liability
Low set up costs
Easy to set up
Disadvantages of being a private limited company
Limited stock exchange access.
Restrictions on company activities.
Why do businesses choose to become a private limited company
The desire to retain control over the company
Taking decisions in the company’s long term interests
Enjoying the profits generated by the company
What is a public limited company
Public limited companies tend to be much larger than private limited companies. This has Plc after its name.
Advantages of a public limited company
Limited liability
Access to capital
Publicity
The ability to take over other companies
Disadvantages of a public limited company
Expensive to set up- 50,000 minimum set up cost
Greater risk of a hostile takeover
Shareholders will expect to receive a percentage of the profit as dividends.
What is a not-for-profit business
These are businesses that are set up with the intention of not making profit.
What is a social enterprise
Social enterprises are business that have social aims and trade in order to benefit the community or society in general.
What is the role of shareholders
They invest their money into the company by buying shares, and have the potential to profit from the company if the business goes well.
