3.5,3.6 Sole Traders & Partnerships, Limited Companies

Unlimited liability
> owners are personally responsible for __ debts owed by business

all

Limited liability
> owners are personally responsible for debts up to the a__ they i__ in

amt, invested

Sole trader
> Business where __ person has sole control over ownership & operations & keeps __ profit
> __ liability

1, all, unlimited

Sources of finance for sole traders
> P__ s__
> b__ l__
> f__ & f__

personal savings, bank loan, friends & family

SOLE TRADER

Adv	Disadv
Ø  Easy to set up Ø  Owner has total c__ over business Ø  Owner keeps __ profit Ø  Choose sick days (f__ work hrs) Ø  S__ so better personal r__ w/ customers Ø  Business is smth you like	Ø  __ liability Ø  Small so possibly lots of c__ Ø  Forced to run all aspects of business on your own Ø  Limited access to f__ Ø  Long hrs Ø  No c__: you die = business dies

control, all, flexible, small, relationships, unlimited, comp, finance, continuity

Partnerships

Ø  Business formed by __≥ people with shared investment & usually shared responsibilities

Ø  __ liability

2, unlimited

Deed of partnership
> Helps p__ partners & provide clarity; NOT l__ requirement
> If no Deed of Partnership, everything is assumed to be split e__

protect, legal, evenly

Deed of partnership contents
> v__ rights, r__ of partners, p__/loss split

voting, rights, profit

PARTNERSHIPS

Adv	Disadv
Ø  Partners have s__ skills Ø  S__ decision making Ø  Extra finance available (more ppl) Ø  Losses shared e__ Ø  Less legal requirements than bigger business structures	Ø  __ liability Ø  P__ shared Ø  No c__ unless in deed Ø  Can’t sell shares Ø  All partners bound by d__ Ø  Less freedom than sole traders

specialised, shared, equally, unlimited, profit, continuity, decision

Directors
Ø  Chosen by s__ in a vote at an Annual G__ Meeting (AGM)
Ø  R__ the company on behalf of shareholders
Ø  Directors can be v__ off at the next AGM if shareholders don’t like them

shareholders, general, run, voted

Starting a Limited Company

> To start, you register at the ‘C__ Office’
> You also create a M__ of A__ & A__ of Association

companies, memorandum, association, article

M__ of A__
Gives basic d__ of business e.g. name, address, obj., liability, # of shares allowed

memorandum, association, details

A__ of A__
> I__ running of business e.g. shareholder rights, how to appoint directors, how often meetings run, how & when to prepare company accts

article, association, internal

Private Limited Company (Ltd)

> Smaller type of limited company
> Shares only bought & sold p__; every shareholder must agree on who they’re sold to
> Shares can’t be advertised for general sale
> Shareholders usually f__ or close friends
> Board of directors usually shareholders

privately, family

Adv of Ltd

Ø  Shareholders have l__ liability

Ø  More f__/capital raised as no limit on shareholders (technically)

Ø  Easy to keep c__ of business as outsiders can’t buy shares

Ø  Continuity

Ø  T__ advantages (less tax % than sole traders)

Ø  Looks more p__; other businesses/banks more willing to trade

limited, finance, control, tax, professional

Disadv of Ltd

Ø  Profits s__ between all shareholders

Ø  ↑l__ procedures = ↑time & $$

Ø  Can’t sell shares to public = potentially __(more/less)money raised

Ø  Financial info can be viewed by anyone as it’s registered with the Companies Office

Ø  Shareholder wants to leave & sell shares = takes time as all shareholders must agree

> Less freedom than sole trader/partnership

shared, legal, less

Public Limited Company (PLC)

Ø  Bigger; shares openly bought & sold on the s__ market

Ø  Value of shares goes ↑↓ based on business performance & other external factors

Ø  Very e__ to set up as min. amt of share capital needed

↑advertising costs to let ppl know shares are available

stock, expensive

Define dividend

payment made to shareholders

Adv & Disadv of PLCs

Adv	Disadv
Ø  Lots of money raised (pot. unlimited) as shares made available to e__ Ø  Benefits from e__ of scale Ø  May dominate market as you’re b__ Ø  Banks likely to l__ money (less risk) Ø  Pressure from shareholders encourages executives & managers to perform well	Ø  Large s__ up costs Ø  Ez to lose c__ of business (anyone can buy shares) Ø  All financial info viewed by public Ø  Less personal relationships w/ customers Ø  Laws & Acts company has to follow Ø  Divorce of ownership: diff. owners have diff. ideas of running business OR directors run business diff. to shareholders’ vision Ø  Big PLC = hard to adapt to changes in market

everyone, economies, big, lend, set, control