Lecture 1-Business entities

Question 1

What is a sole trader?

Answer 1

An individual that runs a business on his accounts

Question 2

What is a partnership in a business?

Answer 2

When 2 or more individuals work in business together

Question 3

What is a companies business entity?

Answer 3

A separate legal entity to both its owners and directors

Question 4

What are the two types of limited companies?

Answer 4

-Private limited companies
-Public limited companies

Question 5

3 features of private limited companies

Answer 5

-Easy to set up
-Less ongoing administration is required
-Can only sell shares privately

Question 6

3 features of public limited companies

Answer 6

-More complex to set up
-More ongoing administration is required
-Can sell shares publically

Question 7

What is unlimited liability?

Answer 7

Where owners have personal responsibility for the debts incurred by the business

Question 8

What is limited liability?

Answer 8

A business entity that prevents individuals from being liable for the company’s financial losses and debt liabilities.

Question 9

What are current assets?

Answer 9

-Cash
-Inventory
-Receivables

Question 10

What are non-current assets?

Answer 10

-Land&Buildings
-Plant and machinery
-Investments

Question 11

What are 4 benefits of running a business as a limited company?

Answer 11

-Limited liability for owners
-Projects a more professional external image
-Greater flexibility for tax planning
-More flexibility for raising future finance

Question 12

What are 4 disadvantages of running limited company?

Answer 12

-Time and expense to have accounts prepared and filed at companies house
-Disclosure of financial info to competitors via filed accounts
-Requirements to have accounts audited
-Possible dilution of control