Types of Businesses Flashcards
(12 cards)
Businesses in the private sector
Sole traders
Partnerships
Limited liability partnerships
Private and public limited companies
Advantages of being a sole trader
Very few legal requirements to start a business of this kind
The sole trader is entitled to all profit after tax
The sole trader cannot be subject to a take over because they cannot distribute shares.
Define sole trader
Legally the business and the sole trader are one entity therefore the business is unincorporated. `This individual can make all executive decisions solely
Disadvantages of being a sole trader
Unlimited liability - personal possessions can be seized to re pay business debt
Business seizes to exist upon death of the sole trader
It can be difficult to raise capital to expand the business due to it’s small size that is seen as risky
Define a Partnership
A partnership is a business agreed to be run by multiple owners who can contribute to the business
What are the maximum and minimum amount of partners
Max: 20
Min: 2
Advantages of a partnership
Specialisation
Losses can be shared as well as workload
due to the payment of income tax the financial state of the partnership can be kept private.
Disadvantages of a partnership
Unlimited liability
Partners are equal therefore there is room for disagreement which may prolong important decision making.
Losses must be accounted for by everyone regardless of who made the mistake.
Partnership e.g.
Solicitors
Accountants
Pearson Spectre Litt
Ben and Jerry’s
Define Limited company
they have their own legal identity and can sue or own assets in their own right (incorporated). The ownership is divided up into equal parts called shares.
Private limited company
small business such as an independent retailer in a market town. Shares do not trade on the stock exchange.
Public Limited comapny
A limited company that shares can be purchased publicly
