Buisness 1.1

Sole Trader

A type of private sector business entity owned and run by one person.

Unlimited Liability

A situation where the owner's personal assets can be used to pay business debts.

Advantages of Sole Traders

Include few legal formalities, profit taking, being your own boss, personalized service, privacy, and quicker decision making.

Disadvantages of Sole Traders

Include unlimited liability, limited source of finance, high risk, workload and stress, limited economies of scale, and lack of continuity.

Partnership

A business owned by two or more individuals, where at least one has unlimited liability.

Deed of Partnership

A legal document that formalizes agreements between partners regarding profit-sharing and responsibilities.

Advantages of Partnerships

Include financial strength, specialization and division of labor, financial privacy, and cost effectiveness.

Disadvantages of Partnerships

Include unlimited liability, lack of continuity, prolonged decision making, and potential disputes.

Privately Held Companies

• A privately held company’s shares are owned by friends and/or family 

• These shares cannot be traded publicly on the stock exchange 

• Shareholders can only sell their shares if they have prior permission from other shareholders 

• Typically privately held companies are also family businesses 

• A group of friends/family owns a company and are not permitted to sell 

• shares to anyone out of the approved people 

• Private shares 

Publicly Held Companies

Companies whose shares can be traded publicly on the stock market.

Limited Liability Companies

Businesses owned by shareholders, where shareholders are only liable to the extent of their investment.

Incorporated vs Unincorporated

Incorporated refers to businesses like LTDs and PLCs that are separate legal entities, while unincorporated includes sole traders and partnerships that do not have a separate legal identity.

Capital Growth

Reinvesting profits back into the business to increase its capital and value.

Financial Privacy

The confidentiality regarding the financial information of a company, especially in partnerships and limited liability companies.

Economies of Scale

Cost advantages that a business obtains due to the scale of operation, with cost per unit of output generally decreasing with increasing scale.