business ventures Flashcards
(30 cards)
Factors when choosing a form of ownership
The start-up cost and the future capital
The risk involved
How capital will be contribute
What is from of ownership
The legal position of the business and the way it is owned
What is prospectus
prospectus is a document inviting the public to buy
An audit is what
process where an organization’s accounts are checked to make sure its financial opeations are honest
The difference between profit and non-profit organization
Profit companies
This company is formed with one aim of making a profit
A company incorporated for financial gain for its shareholders
Profit orgainsations are responsible for paying taxes based on their profit
non-profit companies
This company is formed for charity purposes or to promote social and cultural activities
A non-profit organisations are not required to pay taxes on net income
what is a sole trader
is a business that is owned and managed by one person
characteristics of a sole trader
There are no legal requirements regarding the name regarding the name of the business
Legally’ the sole trader and the business are not separate entities
the owner has unlimited liability
Advantages of a sole trader
Its easy and quick to form a sole trader and less control
The owner can take quick decisions
All assets of the business are owned by the sole trader
The disadvantages of the sole trader
if the owner doesnt have enough knowledge the business may fail
They can’t expand the business operations cause of limited capital
What is a partnership
When the business is owned by two or more people
Characteristics of the Partnership
Should be a minimum of two people
They share profit according to the partnership agreement
There are no legal requirements
Advantages of a partnership
all bring their own knowledge in the business
All partners have a personal interest in the business
Disadvantages of the partnership
it becomes difficult to raise capital
discussion between the partners may be slow
difference between a sole trader and partnership
Sole
Owned by one person
Quick and easy decisions
If the owner doesnt have enough knowledge the business may fail
Partnership
Owned by two or more people
slow decisions between partners
put skills together to make the best decisons
characteristics of of a close corporation
Must end with CC
Each member contribute some assets
Members of the CC both own and control the business
the advantages of CC
Can be converted to a private or public company
there are fewer legal requirements for the company
the disadvantages of CC
there are no directors
limited growth the business can only have ten members
Characteristics of a private company
Limited liability
The company cant sell shares to the public
It must prepare annual financial statements
Advantages of a private company
Managed by one skilled director
the business has continuity
information about the business is only known by shareholders
Disadvantages of private
Directors may sometimes be held liable for debts
decision making takes a long period of time cause its a large group of people
what is a personal liability company
the name ends with INC
characteristics of a public company
A minimum of one person
It ends with LTD
The shareholders have limited liability are not personally liable for the debts of the business
Advantages of a public company
Shareholders can sell their shares
Strict regulatory requirements protect shareholders
Easy to raise funds for the growth through the sales of shares
Disadvantages of public company
Auditing of financial statement is compulsory
Increased director’s fees willl increase expenses which will reduce net profit
