Forms Of Business (liability) Flashcards
(14 cards)
Business forms
Legal structure that takes place in UK
- sole trader
- partnership
- Ltd
- PLC
Limited liability
- The owner of the business has no personal liability for business debts
- the owner has separate legal identity
Unlimited liability
- the owner of business has personal liability for business’s debt
- owner would have to use personal funds to pay debts
Sole trader
Business owned by one owner, but they can take on staff
- unlimited liability
- tends to be small business
Sole traders pros and cons
PROS:
- easy to set up
- make decisions quickly
- own boss
CONS:
- unlimited liability
- difficult to raise money
Partnerships
- 2-20 partners share risk, cost and responsibilities
- partners share profits and gains
Partnerships pros and cons
PROS:
- easier to raise capital
- no need to make public any info
- range of skills
CONS:
- unlimited liability
- patterns may have disagreements
Private limited company (ltd)
- can expand by selling more charges
- friends and family can buy shares- not public
Ltd pros and cons
PROS:
- limited liability
- can raise extra capital
- can employ managers
CONS:
- accounts have to be public
- more expensive to set up
- cant sell shares on stock exchange
Public limited company (PLC)
- once Ltd has grown, may consider becoming PLC
- float shares on stock market
PLC pros and cons
PROS:
- access to capital
- increased prestige
- potential from growth and expansion
CONS:
- high set up costs
- potential loss of control, conflict of interest
- vulnerability to take overs
Franchising
- setting up a business with an established name
Franchising pros and cons
PROS:
- franchisor provides support and training
- franchisor decides how much money franchisee must invest
CONS:
- franchisee doesn’t have freedom
- cost of buying franchise
- monthly royalty payments to franchisor
