Understanding Different Business Forms pt.1

What defines a sole trader?

• Who are they to the business

• what are they entitled to after tax

• what are they personally liable for

A single person who is the owner of a business and is entitled to all profits after tax, but is personally liable for the business' debts.

What is an advantage of being a sole trader?

Have the freedom to be their own boss and decide what to do with profits.

What does unlimited liability mean for a sole trader?

They are personally responsible for business debts.

What is a private limited company (Ltd)?

A business where ownership of shares is restricted, and can be owned by family and friends(then become shareholders).

What are the advantages of a private limited company over sole traders?

• Shareholders have…..

• Seperate entity….

• Managed by….

• Shareholders have limited liability, protecting their personal assets from business debts.

• Separate Entity protects shareholders’ personal assets.

• Managed by those who are directors of the company not shareholders.

What are the disadvantages of being a private limited company?

• what are the costs associated with

• any legal obligations to….

• There are costs associated with incorporation.

• And legal obligations to publish accounts each year.

What is the main feature of a public limited company?

• sell shares on…

• how old do you have to be to buy shares…

Sell shares on stock exchange, allowing anyone over 18 to buy shares.

Why might a company choose to become public?

• why do you raise finance (x2) (i and g)

Raise finance for investment and increase growth.

What are the disadvantages of public limited companies?

• What do owners have less say in & what does it lead to in decision making…

• What is a risk of this…

• Owners typically have limited say in how the business is run, leading to potential conflicts in decision-making.

• Risk of Hostile Takeovers

What is a not-for-profit organisations?

Any profit made is reinvested back into the business and cannot be kept by the owners.

What are charities in the context of not-for-profit organisations?

• what does it recieve & grant…

Aim to help others, often receiving tax relief and grant eligibility.

What’s social enterprise?

A business that aims to make a profit while also helping people or the environment.

What is an unincorporated association?

A type of not-for-profit organisation where managers have unlimited liability and are legally responsible for debts.

What is an advantage of bigger not-for-profit organisations being incorporated?

Incorporation protects the individuals running the organisation from unlimited liability.