Unit 1 Flashcards
Unlimited liability
Business and owner are seen as one under the law, so debt becomes personal debt and so a big risk
Limited liability
Owners aren’t responsible for debts of business. Separate legal identity, can only lose what’s invested.
Sole Trader pros cons (4,4)
+control
+profit
+simple
+cheaper (no legal costs for ownership agreement)
- unlimited liability so risky
- may lack expertise
- lack of finance (harder to borrow etc)
- lots of work
Limited companies pros cons (4,3)
+Expertise from shareholders
+No min share capital requirement for LTD
+ Limited liability
+Easy to raise finance than unincorporated (shares and debt)
-Shareholders may not be able to sell their shares without consent of other shareholders
-For PLCs, £50K share capital needed (hard to raise)
-Admin costs
When do companies turn to PLCs, and when may they switch back to LTD
To raise finance and expand.
Switch back if original owners want more control, or run things more privately
Venture capitalists
People who invest in businesses with high risk but high potential
Market capitalisation
Current price x no. Of shares issued
Reasons shareholders invest (3)
Capital gain-market share rise
Dividends
Believe in aims/objectives e.g social ethical etc, not always profit!!!
Ownership on mission/objectives and decisions inc PLC (4)
Non-profit-help communities
Private sector-profit max
Public-benefit society
PLC-shareholders want short term capital gain, however management may want long term gains=conflict
Main Political Factor
Tax
Main Economic factors (4)
Unemployment
Stage in Business cycle
Interest rates
Inflation
How businesses avoid seasonal demand
Lower prices to get rid of stock
How do food producers cope with seasonal supply
Preserve/stockpile
Of course not possible with some foods, or businesses that focus on selling fresh food
