Understanding Different Business Forms Flashcards
(9 cards)
What is a sole trader
A business that is owned and controlled by one person
What is a benefit of being a sole trader
Owner keeps all profits
Owner has complete control
Disadvantages of being a sole trader
He owner has unlimited liability
The owner is the only source of capital
Massive workload
What is a private limited company (Ltd)
Owned by at lead two shareholders
Controlled by directors
Benefits of Ltd
Additional capital can be raised by issuing shares
The owners have limited liability
Disadvantages of Ltd
Profits have to be sheared with all of the shareholders
The ordinal owner can lose control if they own less than 50% of the shares
Slower and more expensive to set up and run than sole traders
What is a public limited company (PLC)
Owned by a large number of shareholders who provide capital
Controlled by directors
Benefits of a PLC
Large amounts of capital raised by issuing shares through stock market
Extra capital can be used to expand
Expansion leads to higher levels of profit
Disadvantages of a PLC
Profits have to be shared with large numbers of new shareholders
Original owners probably lose control as they own less than 50% of the business
Higher annual costs and more paperwork for auditing and submitting the accounts
