Legal Structures Business Flashcards
(16 cards)
What is a sole trader
A business that is individually owned. Finance is provided by the owner
Advantages of being a sole trader business
All decisions are made by yourself
More flexible
Business is easier to set up
All profits go to you
Disadvantages of being a sole trader
The owner is the only source of capital
Sick = no money into business.
Unlimited liability
Longer working hours
Types of sole trader business
Electricians, Plumbers, smaller businesses etc
What’s a partnership
The relationship between 2 - 20 people to do trade or business
Advantages of Partnerships
- More money is invested into the business
- More contributing ideas to the business
What is capital
(Also referred to as a company’s net worth)
The money a company uses to operate and grow
Also referred to as a company’s net worth
Capital is funded primarily by owners of the business, however dependant on the size (PLC/LTD) shareholdrs may also source capital into the business
Factors that cause share prices to rise
- Good financial performance
- Good jnedia publicity
- Improving economic conditions (economic growth, low inflation, low interest rates)
Factors that cause share prices to fall
- Poor financial performance: eg Falling profits
- Missed targets
- Worsening economic conditions: eg rising interest rates/inflation
- Negative external events: Bad media publicity
Factors that affect share prices for PLCs
The number of people who want to buy shares in the company
The number of people who want to sell their shares
Sole trader decision making
It is very quick as there is little to no discussion.
However decisions may be poor due to lack of support and advice
LTD decision making
More complex as there are more people likely to be involved
PLC decision making
Major decisions are agreed on by board of directors
Routine decisions are also made by lower level employees
Sole trader financial performance
Lack of capital may restrict the size and profits of the business
Inturn could restrict ability to be price competitive
LTD financial performance
Size of LTD business varies enormously
Profits will also vary hugely
Limited Liability protects owners possessions -> less affected by debts
PLC financial performance
Greater source of capital for business from shareholders can lead to high profits
However there also may be huge losses due to the size of the business
