business ownership 1.2

what is a sole trader

someone who sets up business on their own.

what are the advantages of being a sole trader.

• quick and easy to set up

• make all decisions for yourself so you don’t have to consult others.

• keep all profits to yourself.

what are the disadvantages of being a sole trader.

• stressful to make all decisions on yourself

• need to handle all aspects of a business

• unlimited liability

• tremendous work loads for the sole trader to do

• sole trader dies the business ends aswell

• likely to be small and wont have the power of a large business

what is the definition of unlimited liability

the personal possessions of the owners of a business at risk of being used to settle debts of the business, no limit to money being paid

what is a partnership

two or more people join together in a business enterprise to pursue profits

what is the definition of deed of partnership

agreement between two partners that set out rules of a partnership like how profits will be divided and how partnerships will be values if someone wants to leave.

what are the advantages of a partnership

• each partner can contribute money to the start up of the business

• more people to discuss decisions on strategies and problems

• each partner can specialise in a different aspect of the business

• partners can cover for each other when one is sick

what are the disadvantages of a business

• different ideas on how to solve a issue

• decisions made are slower than a sole traders

• rewards divided between partners

• unlimited liability

what is a stakeholder

individual and organisations that are affected by and effect activities of a business

what is a company

business with own legal identity it can own items own money can be sued and can sue

what is limited liability

exists when the owner’s responsibility for the businesses’ debts is only the amount they invested.

advantages of a company

limited liability

better status in the eyes of the customer

continue after death of founders

can bring in investors

disadvantages of a company

• have to register

• must disclose information on sales and profits

• must have accounts independently checked

• if there are other investors the original founder is not in full control of the business

types of a company

private limited company (ltd)

public limited company(plc)

what is a plc

public limited company is a large business owned by its shareholders and its shares can be sold freely for stock exchange

what is a private limited company

business owned by its shareholders whose shares cannot be freely traded on stock exchange

what is a flotation

occurs when a ltd becomes a PLC and has shares on stock exchange.

advantages of ltd

limited liability

better reputation than sole traders

founders die company still exists

managers can be employed to run day to day tasks while owners retain control and profits

disadvantages of ltd

legal procedure need to be completed

summary of business financials accounts produced have to be available to general public

advantages of a plc

can advertise shares to general public

attract more media coverage have more shareholder

have better status than ltd

investors are willing to buy more shares

disadvantages of a plc

media coverage can also be bad rather than good

cant control who buys shares

more regulated than limited company

what is an not for profit organisation

like a charity they are set up to acheive objectives other than profit