Week 1 Flashcards
(29 cards)
what is a sole trader?
a sole trader operates a business keeping profits which are made - overs a service eg tax advisor
what is a partnerships?
a business which is run by two or more people with a view of making a profit - companies are limited to the number of partnerships - professional partnerships are exempt
what is a limited company?
company is regarded as a separate person for law purposes - debts are separate from owner
advantages of sole traders
- easy to start up
* no legal formalities
disadvantages of sole traders
- owner bears all consequences of legal action against business
- remains small-scale
advantages of partnerships
*management is shared - benefit from complementary skills
disadvantages of partnerships
- partners are responsible by law for consequences of eachothers action
- unlimited liability
advantages of a limited company
- shareholders can invest in shares knowing they wont be pursued for contributions once their shares have been paid for
- shares can be sold and bought so that transfer of ownership is relatively easy and straight forward
disadvantages of a limited company
- setting up requires adherence to legalities - professional help may be required
- members of public have access to information
capital introduced
when starting up a business - founders may make an initial contribution of their own resources
retained profit
the amount of profit left in the business is referred to as retained profit
grant
given by government - dont need to be repaid BUT may be strings attached
venture capitalists
provide short to medium-term financial boost - usually buys into shares and often provides management expertise
income tax
charged according to individuals circumstances at income tax rates - sole traders and partners
corporation tax
directors pay tax based on their salary - company also pays tax based on profits
capital gains tax
if items sold gain profit then they will be taxed - applies to both individuals and companies
value added tax for private individuals
tax on transactions in goods and services
value added tax for businesses
act as collectors of tax and pay to government (HRMC)
what annual accounting information does a sole trader need
- tax returns for HMRC
- statement of profit or loss
- balance sheet
what quarterly accounting information does a sole trader need
*quarterly VAT return
what accounting information within the business does a sole trader need
- prepare regular accounting statements
* monthly statement of profitability
what annual accounting information do partnerships need
audit - not a legal requirement - external auditor checks financial statements are properly prepared and fairly stated
what accounting information within the business does a partnership need
monthly statements of profit - more detailed than sole trader as larger
what financial information outside of the business do limited companies need
- publish financial information via Companies House
* submit tax and VAT returns
