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types of business 4
| Question | Answer |
|---|---|
| what is a sole trader? | a business owned by one person |
| sole trader legal regualtions | - owner must register with Gov Tax Offixe - owner must be registered with Registrar Of Business Names OR put name on all docs -sole trader must observe laws which apply to all business in that industry |
| advantages of being a sole trader? 6 | - few legal regulations - their own boss -complete control -close contact with customers - keeps all profits - secrecy in business matters |
| disadvantages of being a sole trader? 4 | - no one to discuss business matters, sole owner -no benefit of limited liability=unlimited liability -likely to remain small because capital for expansion=restricted -unlikely to benefit from economies of scale -no continuity after death of owner |
| what is a partnership? | a form of business in which 2 or more people agree to jointly own a business |
| what is a partnership agreement | written and legal agreement between business partners (not essential but recommended |
| advantages of a partnership | -more capital can be invested -responsibilities are shared -both partners are motivated to work hard -losses are shared by partners too |
| disadvantages of partnership | - did not have limited liability -unincorporated business, would end if one owner died - partners can disagree, decisions take time -if one partner is inefficient / dishonest, other partner could suffer loss -limited to 20 partner, growth=limited |
| What is an incorporated business? | companies that have a separate legal status from owners |
| What is unincorporated business? | one that does not have separate legal identity, sole traders and partnerships -means that business will continue to exist if owner dies + company can make contracts and a company accounts are kept separate from owners |
| who are shareholders? | owners of a limited company who buy shares and represent part ownership of company |
| private limited companies | owned by shareholders but cannot sell shares to public |
| advantages of a private limited company (LTD) | - can raise capital from sale of shares -limited liability for shareholders -separate legal identity -continuity if owner dies |
| disadvantages | -legal formalities (Articles/Memorandum of Association) + the ROC -Cannot sell shares to public -Accounts are available for public to see (low secrecy) -Nor easy to transfer shares (needs agreement from other shareholders) |
| What are public limited companies (PLC) | businesses owned by shareholders but they can sell shares to public and are tradeable on stock exchange -not owned by gov, in private sector |
| advantages of a public limited company | -offers limited liability to shareholders -an incorporated business (continuity after death) -rapid expansion possible, specialist managers appointed -can sell shares to public (no restriction to buying selling or transfer) -usually has high status |
| disadvantages of public limited company | -many legal formalities -more regulations and controls over PLC in order to protect interests of shareholders (no secrecy) -selling shares to public is expensive -divorce between ownership and control |
| What is an Annual General Meeting? | a legal requirement for all companies. shareholders may attend and vote on who they want to be on the Board of Directors for coming year -shareholders own, directors and managers control |
| what are dividends | payments made to shareholders from profits of company |
Created by:
elisseu
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