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8 Cards in this Set
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- Back
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Business Forms |
Legal structure of business in the uk. •be a sole trader •be a private limited company (ltd) •be a public limited company (plc) |
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Definition: Limited liability |
The owner of a business having no personal liability for the businesses debts. The owner has a separate legal identity from the business and is not liable for the payment of debts from their own personal funds. |
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Definition: Unlimited liability |
Owners have full responsibility for the debts. If they have debts or is sued, the owners may lose savings or possessions in order to pay said debts or fines. |
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Limited liability |
•LTD / PLC •The shareholders liability for paying back debt is limited to the amount of the investment. •If the business accrues debt the owners will have to sell their own possessions to pay. •The business is a separate legal identity to the owner. |
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Sole trader |
The business owned by one owner; they can take on employees or managers to run their business. •Also known as a sole proprietor •Full control over business decisions •Mostly small businesses • Has the disadvantage of unlimited liability For example: Hair dresser, Plumber, Paint and Decorator, Gardener |
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Advantages of sole traders |
•Easy to set up •Make decisions quickly •Less capital needed •All profits kept by owner •Can offer personal attrition to customers •Don’t have to make any information about the company public •They are their own boss! |
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Sole trader Disadvantages |
•Unlimited liability, could lose possessions •Difficult to raise money (high risk) •Don’t have economies of scale (buying in bulk) •No one to take over due to ill health or holiday matters; unless they take on staff |
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Public limited company (PLC) |
Once grown in size it needs to further invest; cannot get from the current owner and so may choose to become PLC. If it intends to float shares |
