Types of Ownership Flashcards
What is a sole trader?
Where one person owns a private business.
The sole trader may employ other people but will bear the financial risks of the business alone.
EG. Tony’s Hair Studio-
Small one off stores, corner shops, newsagents etc
What is a partnership?
A firm owned by between 2-20 people who share the profits and usually have unlimited liability for the debts of the firm.
EG. Warner Bros Studios- started with the 4 Warner brothers jointly owning the business.
What is Unlimited Liability?
Where shareholders are unable to pay off a companies debts, and as a result, there personal assets are used to do so.
If a persons stake in a company is not enough to cover their share of the debt, then their personal savings or assets will be used.
What is Limited Liability?
This is where a shareholder or investor cannot lose more than they invested.
If debts need to be paid and an investor only has £2000 in the company, they are only liable to pay £2000 and no extra.
What does it mean to ‘Incorporate’ a business?
Establishing a business as a separate legal entity from its owners and therefore allowing it to have limited liability.
What is a Private Limited Company? (Ltd)
An incorporated business which is owned by a few shareholders, but the shares cannot be sold to the general public. The shareholders enjoy limited liability.
EG. Boots, JCB, Virgin Atlantic.
What is a Public Limited Company? (PLC)
A company with a separate legal existence from its shareholders who enjoy limited liability. The shares can be listed on the stock market and can be bought and sold by members of the public.
EG. Microsoft, Facebook, Chrysler
What is the stock market?
A place that shares of publicly held companies can be bought and sold.
Place for companies to sell its shares quickly.
