Types of ownership Flashcards
(12 cards)
What is a benefit of a sole trader?
Total control over the business by owner
It’s cheap to start up
You can keep all the profits for yourself
What is a sole trader?
Definition: A sole trader describes any business that is owned and controlled by one person - although may employ workers. They normally provide specialist services such as hair dressers and plumber in you local area
What is a drawback to a sole trader?
You have unlimited liability
Difficult to raise finance
Problems with keeping the business going if they retire or die
What is a partnership?
Definition: A business that is owned by between two and twenty people. Doctors and dentists & solicitors are typical examples of professionals that may go into partnership. They normally trade in a local or regional area for example Wallsend or North East.
What is a benefit to a partnership?
Partnership bring money and resources into the business
The responsibility is spread across more owners so if the business gets into difficulty then they have more people to share the debt with
What is a drawback to a partnership?
You must share any profits that have been made by the business
You have less control of the business depending on the number of partners
May have disagreements about things within the business
What is a private limited company?
Definition: Often a small independent business that is owned and run by share holders who do not sell their shares to the public on the stock exchange. They are sold privately to friends & family. In return for buying a share you will get a small share of the profits - divided. Normally nationally run organisations.
What is a benefit to a private limited company?
The shareholders have limited liability meaning they only lose what they put into the business
Minimum number of shareholders to start the business is 2
More capital can be raised as the maximum number of shareholders is 50
What is a drawback to a private limited company?
Growth may be limited because maximum shareholders allowed are only 50
The shares in a private limited company cannot be sold or transferred to anyone else without the agreement of other shareholders
What is a public limited company?
Definition: Usually a large, well known business. They sell shares to the public on the stock exchange. In return for buying a share you will get a small share of the profits called a dividend which is issued every 6 months
What is a benefit to a public limited company?
There is limited liability
The business has separate legal emoting which means that the business will continue even if any of the shareholders die
There is no maximum number of shareholders the business can have - unlike any other form of ownership
What is a drawback to a public limited company?
There are lot of legal formalities required when forming a Public limited company. It is also costly and time consuming.
The original owners may lose control.
In order to protect the interest of the ordinary investor there are strict controls and regulations to comply and companies must publish their accounts
