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22 Cards in this Set
- Front
- Back
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What are the 4 types of business ownership? |
Soletrader Partnership Private limited company Public limited company |
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What are the two types of businesses? |
Soletrader Partnership |
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What are the two types of companies? |
Private limited company (ltd) Public limited company (plc) |
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What do soletraders and partnerships have? |
Unlimited liabilty |
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What do private and public companies? |
Limited liability |
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What are the advantages of being a soletrader? |
Simple to set up Small amount of capital to set up Easier to keep overall control |
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What are the disadavatages of being a soletrader? |
Development may be limited Risk of unlimited liability May be difficult to take holidays |
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What are the advantages of being in a partnership? |
Relatively easy to set up Can share knowledge Shared skills of partners |
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What are the disadvantages of being in a partnership? |
Partners may disagree or fall out Risk of unlimited liability Limited amount of capital may be raised |
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What are the advantages of being in a private limited company? |
More access to capital- can sell shares to family and friends Limited liabilty More access to knowledge and experience bigger ownership |
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What are the disadvantages of being in a private limited company? |
More costly to set up (admin fees are higher) Accounts have to be published (not private/confidential) Loss of sole control of business as shareholders own the company. |
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What are the advantages of being a public limited company? |
More access to capital (sell shares on stock exchange) Limited liability Cheaper borrowing on bulk purchasing of supplies (economies of scale) |
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What are the disadvantages of being a public limited company? |
Very costly to set up (admin fees are higher) Accounts have to be published (therefore not private/confidential) Risk of takeover by rival companies. |
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What is unlimited liability? |
Unlimited liability means that the owners of a business are personally liable for the debts of the business. Could mean the owners losing personal assests as well as business assets. |
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What are the implications of unlimited liability? |
Risky for business owners as they're personally liable Owners can lose personal possesions Less costly as less paperwork needed to become limited. |
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What is limited liability? |
Limited liability means that owners of a company (the shareholders) only lose the amount of money they invested in company. This means the owners lose what they invested but don't lose any personal assets. |
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What are the implications of limited liability? |
Cna give owners confidence to push business to expand Less threatening to families well being as personal assets are protected. Possible scope for fraud (illegal) |
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What is opportunity cost? |
Opportunity cost is the cost of missing out on the next best alternative when making a decision. |
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Why do companies pay divendends when the profit they make is so important for financing growth and avoiding debt? |
Shareholders expect an income from their investment only early stage fast growers such as snapchat can get away with paying no dividends. |
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Why might suppliers refuse to give credit to a new small company? |
A company by definition has limited liability. So suppliers are wary of giving credit when if the company fails there is no way to recoup the cash from the business owners. |
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Why might it be easier for a partnership to raise finance for expansion than a sole trader? |
Simply because the partnership has more than one owner i.e. there are no pockets to dip into. |
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How expensive is it to run a company instead of a soletrader? |
Not that costly. You can form a company for little more than £100 and the on going accounting costs are around £1200 a year. |
