Ownership and liability

• What is a sole trader?

  An individual owning a business alone
• Why are hairdressers often sole traders?

  They typically operate independently
• What are the advantages of being a sole trader?

  • Keep all profits
  • Quick and easy to set up
  • No disagreements with owners
• What are the disadvantages of being a sole trader?

  • Unlimited liability for debts
  • May lack necessary business skills
  • Stress from making all decisions
• What is a partnership?

  A business owned by 2 to 20 people
• What is required to form a partnership?

  A legal document called a partnership agreement
• What are the advantages of a partnership?

  • Specialists manage different business aspects
  • Easy to form a business
  • Greater potential to raise finances
• What are the disadvantages of a partnership?

  • Profits are shared among owners
  • Potential for disagreements
  • Unlimited liability for debts
• What is a Private Limited Company (LTD)?

  A company that raises funds by selling shares
• Who can buy shares in a Private Limited Company?

  Friends and family of the owners
• What are the advantages of a Private Limited Company?

  • Limited liability for owners
  • Easy to raise finance through shares
  • Owners retain most control
• What are the disadvantages of a Private Limited Company?

  • Shareholder agreement needed for profit distribution
  • Finance limited to friends and family
  • Less privacy in business operations
• What does limited liability mean?

  Owners are not responsible for all debts
• What does unlimited liability mean?

  Owners must pay all business debts
• How does liability differ between sole traders and Private Limited Companies?

  • Sole traders have unlimited liability
  • Private Limited Companies have limited liability