Business ownership Flashcards
Sole trader
A sole trader is a form of business that is owned and managed by one person, although they may employ other staff. Easy as you don’t need legal documentation but you do need to start trading and pay your tax and national insurance contributions.
Advantages of being a sole trader
*Quick and easy to set up
*No legal documentation
*Owner makes all decisions themselves
*Owner keeps all profit themselves
*Choose own hours of work
Disadvantages of being a sole trader
*Stressful making all the decisions
*Unlimited liability which means you can lose personal possessions if business fails
*May have to work longer hours as you can’t share workload with anyone.
*Have to handle all aspects of the business, finance, marketing
*Difficult to raise funds as you have to reply mainly on your own resources
Partnership
A partnership is created when two or more up to 20 people set up a business to pursue a common purpose.
Advantages of partnership
*All partners can contribute financially so it is easier to raise finance
*More people to help with decision making so better decisions can be made
*Each of the partners can specialise in a particular aspect of the business
*Parters can cover for each other if others are on holiday or ill.
Disadvantages of partnership
*Unlimited liability so if one partner makes a mistake that makes the business fail all partners must pay a price.
*Disagreements about solving problems
*Profits have to be shared between partners
*Decisions can be slower as you have to take everyone’s opinions into consideration
Private limited company
A private limited company cannot advertise its shares for sale on the stock exchange so is often owned by family or friends.
Advantages of private limited company
*Limited liability which means possessions are safe but lose the money put into the business.
*If the business founder dies, the company still exists and whoever owns the shares continues with the business.
*Mangers can be employed to run the day to day business while the owners retain control.
Disadvantages of private limited company
*Legal procedures need to be completed such as registering the company with companies house.
*Financial accounts mush be published annually to the general public.
*The business must pay corporation tax.
Public limited company
A public limited company sell their shares to the public on the stock exchange which will allow them to access much more finance to expand their money.
Advantages of public limited company
*Limited liability
*Sells their shares on the stock market
*PLCS are usually much bigger than Ltds
*Investors may be willing to buy shares because they should be able to sell them later on relatively easily.
Disadvantages of a public limited company
*A PLC is more regulated than a private limited company so it has more things it must do according to the law.
*A PLC cannot control who buys its shares therefore it is possible for competitors to buy the shares and take over the business
Charities
A non-profit organisation that is set up for charitable purposes, theyre aims are set out in law and include the relief of poverty, education, religion, amateur sport, environmental protection, and help for the sick, disabled or elderly.
Any profit made is to invest these charitable causes.
