Business ownership (part 1)

• What is the main characteristic of unincorporated businesses?

  No difference between business and entrepreneur
• What does unlimited liability mean for a business?

  Personal assets used to pay business debts
• What is a sole trader?

  A business owned by one person
• What are the features of a sole trader?

  • One owner
  • Can have employees
• What are the advantages of being a sole trader?

  • Quick decision making
  • Easy to set up
• What is a partnership?

  A business with 2 or more owners
• What are the features of a partnership?

  • 2 or more owners
  • Set up with a Deed of Partnership
  • Can be limited or unlimited liability
• What are the advantages of a partnership?

  • Easier to raise capital
  • More ideas/expertise
  • Owner keeps all profit
  • Shared risk/decisions
  • Total financial privacy
• What are the disadvantages of a partnership?

  • Usually unlimited liability
  • Hard to raise capital
  • Disagreements
  • Pressure on partners
  • Profit is shared
  • Lack of continuity if a partner leaves
• What are business assets?

  Items owned by the business
• What are personal assets?

  Items owned by the entrepreneur
• What does it mean for a business to be incorporated?

  It is registered as a company
• How does incorporation affect the relationship between investors and the business?

  It legally separates them from the business
• What is limited liability?

  Shareholders' personal assets are safe
• What happens to shareholders' personal assets if the business fails?

  They are protected from business liabilities
• What type of assets are used to pay business liabilities or debts?

  Only business assets are used
• What is the abbreviation for a private limited company?

  Ltd
• What are the features of a private limited company?

  • Investors buy shares privately (e.g., family, contacts)
  • 1 share = 1 vote
  • Requires 2 legal documents: memorandum and articles
• Who can buy shares in a private limited company?

  Family and contacts
• What does 1 share equal in a private limited company?

  1 vote
• What are the advantages of a private limited company?

  • Limited liability for shareholders
  • Easier to raise capital
  • Control over ownership
  • Continuity if shareholders change
• What is one advantage of a private limited company regarding liability?

  Limited liability for shareholders
• How does a private limited company facilitate raising capital?

  It is easier to raise capital
• What does control over ownership mean in a private limited company?

  Shareholders maintain control over ownership
• What is meant by continuity if shareholders change?

  The company continues despite shareholder changes
• What are the disadvantages of a private limited company?

  • Complex to set up
  • Financial information is reported and published
  • Harder to raise finance than a public limited company
• What is a disadvantage of a private limited company regarding setup?

  Complex to set up
• What happens to financial information in a private limited company?

  It is reported and published
• How does raising finance compare between private and public limited companies?

  Harder to raise finance than a public limited company