Unit 1.2: Business Ownership

Partnership

A business that is owned and run by between two and twenty partners.

Characteristics of a partnership

• easy to set up

• all profits (after tax) goes to partners

• partners are personally responsible for any mistakes

• record needs to be kept of expenses and sales

• a deed of partnership sets out the terms of the partnership

• partners trade under their own name or a name of their choice

Partnership Act (1890)

The law which sets out how partnerships can be set up

Deed of partnership

A formal agreement setting out the legal details of a partnership.

Sleeping partner

A partner who is not involved in the day-to-day running of the business.

Unlimited liability

The partners are responsible for all of the debts incurred by a business.

Limited company

A business that is owned by shareholders and run on their behalf by directors.

Characteristics of a limited company

• has its own legal identity

• limited liability

• private limited companies have ‘limited’ or ‘ltd’ in their name

• public limited companies have ‘plc’ in their name

• private limited companies are owned by family and friends

• public limited companies sell shares on the stock exchange

Flotation

The process of issuing and selling shares to public investors.

Shareholder

A person who owns shares in a company.

Stakeholder

A person with an interest or concern in the activities of a business.

Stock exchange

A market in which securities are bought and sold

Public limited company

A business that is managed by directors and owned by shareholders and can offer their shares to the public.

Not-For-Profit

A type of organisation that does not earn profits for its owners.

Sole trader

A self-employed person who owns and runs their own business as an individual.

Profit

The difference between the total revenue of a business and the total costs of a business, when revenue is greater than cost.

Characteristics of a not-for-profit organisation

• funded by members who do not expect a return

• objectives are cultural, religious and/or social

• typically tax-exempt charities

Characteristics of a sole trader

• name of business must not be a name already in use

• all profits (after tax) go to sole trader

• personally responsible for any mistakes

• record needs to be kept of expenses and sales

• sole traders must pay their own income tax and NICs

• name of sole trader must be written on any paperwork