Unit 1 - 1.3 - Business Ownership Flashcards
What happens when a business becomes incorporated?
It becomes a separate and distinct legal entity independent of the business owners.
Are sole traders and partnerships incorporated?
Yes sole dtraders and partnerships are not incorporated.
What types of companies are incorporated?
Private limited companies and public limited companies are incorporated.
What is a key characteristic of incorporated businesses?
They have limited liability.
Fill in the blank: Sole traders and partnerships are _______.
not incorporated.
True or False: Incorporated businesses have unlimited liability.
False.
What does limited liability mean?
Owners are not personally liable for the debts of the business.
What is a partnership?
A business owned by between 2 and 20 partners.
What is a sole trader?
A business owned by one person.
What is a feature of a sole trader?
Easy to set up.
Who makes all the decisions in a sole trader business?
The owner makes all the decisions.
What happens to a sole trader business when the owner dies?
The business stops when the owner dies.
Is business information public for a sole trader?
No information about profits must be published.
What is a limitation of raising finance as a sole trader?
This is limited because there is only one person to invest savings and banks may think they are risky to lend to.
What is a feature of a partnership?
Only needs a deed of partnership (a written agreement between partners).
How are decisions made in a partnership?
The partners (usually) make decisions between themselves.
What is a potential issue in decision-making for a partnership?
It is possible that the partners may disagree which would lead to problems making decisions.
How are profits handled in a partnership?
The profits will have to be shared between all the owners.
What happens to the deed of partnership when an owner leaves or joins?
A new deed of partnership will be needed when an owner leaves or joins.
Is business information public for a partnership?
No information about profits must be published.
What is a limitation of raising finance in a partnership?
Usually there are only a few partners to invest in the partnership and banks may think they are risky to lend to.
What is a feature of a private limited company?
Shareholders can restrict who can buy shares.
What happens to a private limited company if shareholders sell their shares or die?
The business continues even if shareholders sell their shares or die.
Is business information public for a private limited company?
The public can see information about the business.
What is an advantage of raising finance in a private limited company?
New shareholders can invest and banks are willing to lend. Larger amounts can be raised than sole traders and partnerships (usually).
What is a limitation of a public limited company?
The Registrar of Companies requires legal documents, which take time to produce.
Who can buy shares in a public limited company?
Anybody can buy shares.
What happens to a public limited company if shareholders sell their shares or die?
The business continues even if shareholders sell their shares or die.
Is business information public for a public limited company?
The public can see information about the business.
What is an advantage of raising finance in a public limited company?
New shareholders can invest and banks are willing to lend. Large amounts of money can often be raised.
What is the level of liability for a sole trader?
The owner has unlimited liability.
What is the workload for a sole trader?
The owner makes all the decisions but may have to work long hours.
What is the level of liability for partners in a partnership?
The owners (partners) have unlimited liability.
What is the level of liability for shareholders in a private limited company?
The owners (shareholders) have limited liability.
What is the level of liability for shareholders in a public limited company?
The owners (shareholders) have limited liability.
How is the workload distributed in a partnership?
The work is shared between the owners, but the fewer the partners, the greater the workload of each.
Who makes decisions in a private limited company?
Managers are employed to make decisions.
Who makes decisions in a public limited company?
Managers are employed to make decisions.
What is business liability?
Business liability refers to the responsibility of the business’ owners for debts incurred by the business.
What type of liability do owners of unincorporated businesses have?
Owners of unincorporated businesses, such as sole traders and partners, have unlimited liability.
What is limited liability?
Limited liability is a benefit for shareholders who own private limited or public limited companies.
What is the difference between limited and unlimited liability?
Limited liability protects shareholders from being responsible for all the debts of the business, unlike unlimited liability.
What is limited liability?
The owners of a business can only lose the money they have invested in a business if it fails.
What is unlimited liability?
The owner of a business is responsible for repaying all the debts of a business.
What is limited liability?
Shareholders do not have to use their own savings or possessions to pay off company debts if the business fails.
How does limited liability affect business investment?
It encourages investment as people know they are not risking personal possessions.
What is a drawback of forming a limited company?
It can be complicated due to the need for various legal documents to be prepared and sent to the Registrar of Companies.
What is unlimited liability?
Owners must pay back all business debts, even using personal savings or possessions if necessary.
What happens if a business with unlimited liability goes bankrupt?
Owners must sell business assets, and if those do not cover debts, they may need to use personal savings.
How does unlimited liability affect individuals starting a business?
It may discourage people from starting a business due to the risk to personal assets.
What is an impact of unlimited liability on business types?
It can limit the creation and expansion of sole trader and partnership businesses.
What is a benefit of starting as a sole trader or partnership?
It is easier to start up because legal documents do not need to be sent to the Registrar of Companies.
What are assets?
Items owned by the business, such as stock, buildings, and vehicles, as well as less obvious things such as a good reputation.
What factors determine the appropriate type of ownership for a business?
The needs of the particular business determine the appropriate type of ownership.
How do the finance requirements of a start-up business differ from those of an established business?
A start-up business and an established business have very different finance requirements.
What types of ownership can a business have?
A business can have sole trader, partnership, private limited company, or public limited company ownership.
What is an established business?
A business that has been trading for some time.
What is finance in the context of business?
The money used to start up or to expand a business, usually from savings and loans. It is used for capital items such as investment in buildings and machinery.
What are start-ups?
New businesses that are just beginning.
What is a sole trader?
A sole trader is suitable for start-ups that only need a small amount of finance, usually have a low financial risk, and require limited or non-specialist skills.
What is a partnership?
A partnership is suitable for start-ups or established businesses wanting to grow that need larger amounts of finance than sole traders, have a fairly low financial risk, need a wider range of skills, and have owners who want to keep control of the business.
What is a private limited company?
A private limited company is suitable for start-ups and established businesses wanting to grow that need larger amounts of finance, have an increased or high financial risk, and have owners who wish to keep control of the business.
What is a public limited company?
A public limited company is suitable for an established business that wishes to grow, needs very large amounts of finance, and has a very high financial risk.
