1: Types of Business Ownership Flashcards
(26 cards)
What is the skill involved in wanting to start and run a business called
enterprise
What is an entrepreneur
An individual who sets up their own business
What are the reasons why entrepreneurs set up a business despite the risks
Making a profit
Satisfaction from independence
Being able to make a difference (potentially charity)
What are the four main types of business ownership in the private sector
Sole Trader
Partnership
Private Limited Company (Ltd)
Public Limited Company (PLC)
What is a sole trader?
Business which is fully owned by one person who has complete control over how the firm is run
What do sole traders need to do before setting up their business
Register self employed with Revenue and Customs
Apply for a trading licence (Only needed for operation of businesses like nightclubs, nursing homes, pet kennels and restaurants)
Advantages of operating as a sole trader
Low Start-up costs
All profits are kept
Better control
Financial privacy
Disadvantages of operating as a sole trader
Unlimited Liability
Lack of capital
Long hours
Lack of continuity
lack of expertise
Limited economies of scale
What is a partnership
Partnership occurs when two or more people combine to form a business. They share responsibility of running the business
How many people can form a partnership
2-20`
What is the recommended document for a partnership
Deed of partnership/ parternship agreement
Why is a deed of partnership/partnership agreement set up
To help clear up any disputes that may arise in regard to profit
What is included in the deed of partnership/partnership agreement
The trading name and function of the business
The amount of capital each partner will invest
Profit ratio (normally dependent on the amount invested)
Seniority and control over the business
The rules on admitting new partners
Rules on ending the partnership
Advantages of partnerships
Low start-up costs
Shared workload
Specialisation
Raising capital
Financial privacy
More effective decision making
Disadvantages of partnerships
Loss of autonomy (full control)
Conflict between partners
Unlimited liability
Lack of continuity
Lack of capital
What is unlimited liability
Means that if the partnership/sole trader doesn’t have enough money to cover its debts the owners will have to use their own money to ensure debts are paid.
What 2 documents do Limited Companies need to have to form a limited company
Memorandum of association
Articles of association
What is the memorandum of association
Includes details such as official name of company, type of company (PLC or LTD0, work and objectives of company, amount of inital share capital and names of original shareholders
What is the articles of association
Regulations that cover areas such as the different voting rights associated with different types of share, the rules of board meetings, how profits will be divided and duties of directors
What is a private limited company (LTD)
Business which is incorporated therefore a separate legal entity from owners who are known as shareholders and have limited liability
Shares can only be bought by family and friends of shareholders
Advantages of being a Private limited company (LTD)
Raising Capital is easier
Limited Liability
Continuity
Control
Disadvantages of being a Private limited company (LTD)
Sharing of profits
Lack of privacy
Set up costs
Limit on capital
What does Limited Liability mean
individual shareholders are not personally liable for the debts of the company they are only liable for the amount of money they have invested in the company.
What is a Public Limited Company (PLC)
Incorporated business and therefore separate legal entity from its owners who are known as shareholders and have limited liability
Can sell shares to anyone
