Business Ownership Flashcards
(22 cards)
what is a partnership
a business owned by 2-20 partners
what is a sole trader
a business owned by one person
what is an LTD
a private limited company sells shares to invited people
what is a PLC
a public limited company sells shares to anyone
what is a deed of partnership
a document stating: who owns the business, how much money each partner has invested, and the role of each partner in the business
what is a share
a part ownership of a business
what are advantages of being a sole trader
- easy to set up (few forms to complete)
- easy for the owner to control (makes all decisions)
- business information is kept private
what are disadvantages of being a sole trader
- continuity (the business stops if the owner dies)
- raising finance (risky for banks to lend to one person)
- unlimited liability (responsible for paying off all debts)
- workload (have to work long hours)
what are advantages of a partnership
- easy to set up (only needs a deed of partnership)
- business information is kept private
- workload (work is shared between partners)
what are disadvantages of a partnership
- control (disagreements when decision-making)
- control (profits are shared between owners)
- continuity (a new deed is needed when owners change)
- raising finance (risky to lend to and few partners invest)
- unlimited liability (responsible for paying off all debts)
what are advantages of a private limited company
- easy to control (shareholders restrict who buys shares)
- continuity (business continues if shareholders die)
- raising finance (banks are willing to lend money)
- limited liability (only responsible for money invested)
what are disadvantages of a private limited company
- setting up (takes time to produce legal documents)
- business information is open to competitors
- workload (managers are employed to make decisions)
what are advantages of a public limited company
- continuity (business continues if shareholders die)
- raising finance (banks are willing to lend money)
- limited liability (only responsible for money invested)
what are disadvantages of a public limited company
- setting up (takes time to produce legal documents)
- control (anyobody can buy shares)
- business information is open to competitors
- workload (managers are employed to make decisions)
what do owners of an unincorporated business have
unlimited liability (sole traders and partnerships)
what do owners of an incorporated business have
limited liability (LTD’s and PLC’s)
what are effects of limited liability
personal savings don’t have to be used, extra finance can be raised through loans but legal documents need to be prepared
what are effects of unlimited liability
savings must be used, discouragement from personal assets being at risk, but legal documents don’t have to be prepared
what is the suitability of a sole trader
suitable for new businesses that:
- need a small amount of finance
- have a low financial risk
- require limited specialist skills
what is the suitability of a partnership
suitable for new or established businesses growing that:
- need larger amounts of finance than sole traders
- have a fairly low financial risk
- need a wider range of specialist skills
- have owners who want to keep control of the business
what is the suitability of a private limited company
suitable for new or established businesses growing that:
- need large amounts of finance
- have a high financial risk
- have owners who want to keep control of the business
what is the suitability of a public limited company
suitable for an established business that:
- wishes to grow
- needs very large amounts of finance
- has a very high financial risk
