Lesson 2 Flashcards

(34 cards)

1
Q

What is a sole trader?

A

A sole trader is the exclusive owner of a business who has full control over its operations.

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2
Q

What are the advantages of being a sole trader?

A
  • Full control over decision-making
  • Easy and inexpensive to set up
  • Retain all profits
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3
Q

What are the disadvantages of being a sole trader?

A
  • Unlimited liability for debts
  • Limited access to finance
  • Heavy workload
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4
Q

What is a partnership?

A

A partnership is when two or more people form a business together with the aim of making a profit.

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5
Q

What are the three types of partnerships?

A
  1. Ordinary partnership
  2. Limited partnership
  3. Limited liability partnership (LLP)
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6
Q

What is an ordinary partnership?

A

A partnership where all partners have equal authority, share management responsibilities, and are jointly and severally liable for debts.

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7
Q

What is a limited liability partnership (LLP)?

A

An incorporated entity with a separate legal identity from its partners, who have limited liability for business debts.

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8
Q

What are the advantages of a partnership?

A
  • Shared workload and responsibilities
  • More capital available than a sole trader
  • Easier decision-making compared to larger companies
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9
Q

What are the disadvantages of a partnership?

A
  • Shared profits
  • Potential for disagreements
  • Unlimited liability (except in LLPs)
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10
Q

What is a cooperative?

A

A democratically run organisation that is owned and operated by its members for mutual benefit.

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11
Q

What are the core values of a cooperative?

A
  • Honesty
  • Openness
  • Democracy
  • Care for others
  • Social responsibility
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12
Q

What is a limited company?

A

A business with a separate legal identity from its owners and shareholders.

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13
Q

What are the two main types of limited companies?

A
  1. Private limited company (LTD)
  2. Public limited company (PLC)
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14
Q

What are the characteristics of a private limited company (LTD)?

A
  • Can be privately owned by one director
  • Shares not publicly traded
  • Pays Corporation Tax on profits
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15
Q

What are the characteristics of a public limited company (PLC)?

A
  • Must have at least two directors
  • Can offer shares to the general public
  • Managed by a CEO and Board of Directors
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16
Q

What is a state business?

A

A public sector organisation that implements government policy, such as the Environment Agency or Forestry Commission.

17
Q

What are the advantages of a limited company?

A
  • Limited liability for owners and shareholders
  • Easier to raise capital through share sales
  • Separate legal identity
18
Q

What are the disadvantages of a limited company?

A
  • More legal requirements and regulations
  • Must file financial accounts
  • Potential loss of control if shares are sold
19
Q

What are the key features of a sole trader business?

A
  • Owned and controlled by one person
  • Unlimited liability
  • Simple to set up and operate
20
Q

What are the differences between a sole trader and a partnership?

A
  • Sole trader is owned by one person; partnership has two or more owners
  • Sole traders have full control; partnerships share decision-making
  • Partnerships require a legal agreement
21
Q

What are the key responsibilities of partners in a partnership?

A
  • Contribute capital to the business
  • Share profits and losses
  • Manage the business operations
22
Q

How is a partnership formed?

A
  • At least two people agree to form a business
  • A nominated partner registers the business with HMRC
  • All partners register for Self Assessment
  • A written partnership agreement is created
23
Q

What are the benefits of a limited liability partnership (LLP)?

A
  • Partners are not responsible for business debts
  • Individual taxation rather than corporate tax
  • Legal protection for personal assets
24
Q

What are the disadvantages of a limited liability partnership (LLP)?

A
  • Must be registered with Companies House
  • More complex to set up than an ordinary partnership
  • Requires financial records to be filed
25
What is the main difference between an LTD and a PLC?
- An LTD is privately owned and cannot sell shares to the public - A PLC can sell shares to the public and must have at least £50,000 in issued shares
26
What are the advantages of a public limited company (PLC)?
- Can raise large amounts of capital through share sales - Limited liability for shareholders - Can expand operations more easily
27
What are the disadvantages of a public limited company (PLC)?
- More regulations and financial disclosure requirements - Risk of losing control to external shareholders - Expensive to set up and maintain
28
What are the main responsibilities of a company director?
- Ensure the company follows laws and regulations - Make strategic decisions for business growth - Act in the best interests of shareholders
29
What is a community interest company (CIC)?
A type of limited company designed for social enterprises, where profits are reinvested to benefit the community.
30
What is a multinational corporation (MNC)?
A large company that operates in multiple countries, such as Apple, Microsoft, or Unilever.
31
What are the main sources of business funding for different types of businesses?
- Sole traders: personal savings, bank loans - Partnerships: partner contributions, bank loans - Limited companies: selling shares, corporate loans
32
What are the tax responsibilities of different business structures?
- Sole traders and partnerships: taxed individually through Self Assessment - Limited companies: pay Corporation Tax on profits - LLPs: partners are taxed on their share of income
33
What are public sector organisations?
Organisations owned and operated by the government to provide services, such as the NHS, Environment Agency, and Forestry Commission.
34
What is joint and several liability in partnerships?
Each partner is responsible for the business’s debts, meaning one partner can be held liable for the entire amount if others cannot pay.