Chapter 3 Flashcards
Choosing form of ownership (LLCMC)
Legal persona
Liability of business
Continuity of existence
Management and control
Capital
Legal persona
Legal rights of a business or person to enter contracts or own property
Liability of business
Who will take responsibility for debts
Unlimited liability
Personal belongings could be lost
Limited liability
Personal belongings are not at risk
Tax implications
Who will pay tax for the business. 27% on profit
Formation procedures
Different measures a business needs to go the to be established
Sole trader characteristics
1 person
Contributes all capital
Not registered
Unlimited liability
Advantages of sole trader
Quick to establish
Quick decision making
Take all profit
Loyal customer base
Disadvantages of sole trader
Unlimited liability
Growth is limited
No continuity of existence
Rely on own initiative
Partnership characteristics
2-20 people
Based off faith
Raise capital by more partners
Liability of partners
Unlimited liability
Jointly and separately liable for debts
Sleeping partner
Does not actively participate in day to day running
Advantages of partnership
Easy to establish
Skills and Knowledge = synergy
Division of Labour
Different people = different input
Disadvantages of partnership
No separation
Growth is limited
Slow decision making
