1.2 Unlimited/limited liability Flashcards
(17 cards)
1
Q
Unlimited liability
A
- Owners are responsible for debts
- Personal belongings can be taken away
2
Q
Limited liability
A
- Shareholders aren’t responsible for debts
- Personal belongings won’t be taken away
- Owners will lose money they invested if business fails
3
Q
Advantages of sole proprietorship
A
- Cheap to set up
- Quick decisions
- Less capital needed
- Keep all profit
- Flexibility of working hours
- Don’t need to make company information public
4
Q
Disadvantages of sole proprietorship
A
- Unlimited liability
- Limited skills/ no one to share ideas
- Risk for investors
- Impacts of illness
5
Q
Partnership
A
A joint ownership between 2 to 20 people
6
Q
Purpose of deed of partnership
A
This protects each partner if a dispute arises
7
Q
How is a partnership better than a sole trader?
A
- Wider range of skills
- More access to capital
- Shared decision making
- Pressure reduced due to shared roles
8
Q
How is a partnership worse than a sole trader?
A
- Unlimited liability
- Shared profits
- If one partner dies, partnership dissolves
- Causes arguments when making decisions
9
Q
Ltd
A
Private Limited Company
10
Q
PLC
A
Public Limited Company
11
Q
Ltd & PLC are both…
A
Limited liability’s
12
Q
Features of an Ltd
A
- Shares are sold to friends and families
- All shareholders have to agree before issuing more shares
13
Q
Features of a PLC
A
- Shares are sold to the public
- Anyone can buy shares —> leads to a risk of take over
14
Q
Advantages of an Ltd
A
- Limited liability
- Capital raised through selling shares
- Business continues if one owner dies
- Shares only sold if all shareholders agree
15
Q
Disadvantages of an Ltd
A
- Longer legal processes
- More expensive in setting up
- Profits have to be shared
- Have to prepare annual accounts which are published
16
Q
Advantages of a PLC
A
- Limited liability
- Huge amounts of capital can be raised by selling to public
- Likely to have economies of scale
17
Q
Disadvantages of a PLC
A
- Increased costs in setting up
- Anyone can buy shares, increase threat of losing control
- Legal requirements
- More information has to be published than Ltd’s
