What is a busines Flashcards
List the different forms of a business:
Sole traders, private limited company, public limited company, private + public sector organisations, non-profit organisations and social enterprises
What two types of businesses are within the private sector that are unincorporated?
That is a sole trader and partnership
What two types of a business is within a private sector that is incorporated?
Private limited company and a public limited company
List the facts of unincorporated businesses:
They are generally sole traders and partnerships, have no legal entity, owner is liable for debts personally and the business is the owner
List the facts of businesses that are incorporated:
They are generally Ltd’s and Plc’s. They are a creation of a legal entity, the business is liable for debts not the owner personally and the business is separate to the owner
What is a sole trader?
A sole trader is a business owned and run by one individual
What is unlimited liability?
The owners of a business are liable for all the debts that the business may incur ( Sole Trader and partnerships )
List the Advantages of sole traders:
Making key decisions can be motivating, decisions can be made quickly and sole traders can respond rapidly to changes in the market, sole traders often have direct contact within the market and setting up is straightforward
List the disadvantages of sole traders:
Sources of finance are limited, sole traders rely heavily on their own liability to make decisions, it can entail working long hours with limited holidays leading to stress and the personal possessions off sole traders are vulnerable due to unlimited liability.
What is limited liability?
The liability of the owners of a business is limited to the fully paid-up value of the share capital ( Public and private limited companies )
What must businesses go through to gain limited status?
Te firm must go through the legal ‘ Incorporation ‘ process to gain limited status and must produce various legal documents such as memorandum of Association and Articles of Association ad must register the business at Companies House
What is a private limited company?
It is a small to medium-sized business, often run by the family or the small group of individuals who own it
Factors influencing whether to choose being a sole trader:
When the owner has no intention of expanding ( e.g just wants to run one local restaurant ), when there is no need for substantial bank borrowing ( e.g start-up costs are low ) and when the business will be small enough to mean that one person can make all the big decisions
The factors which would influence
whether to become a private limited company:
When the owner has ambitions to expand quickly and therefore needs i to be easier to raise extra finance, when large borrowings mean significant chances of large losses if things go wrong and when the business may require others to make decisions ( e.g when the entrepreneur is on holiday or unwell )
What is a public limited company?
Its a Business with limited liability
