Business Ownership

• Limited liability


  The business owner or owners are only responsible for business debts up to the value of their financial investment in the business
• Limited liability

  • Creditor can only take assets or finances belonging to the company
  • Applies to certain types of business, such as private limited companies
• Unlimited liability


  The business owner or owners are personally responsible for all of the debts of the business, no matter what the value
• Limited liability

  Provides a layer of protection for business owners
• Limited liability business


  Has its own legal identity, meaning that its owner(s) are not personally responsible for its debts
• Unlimited liability


  Gives business owners a greater amount of risk
• An unlimited liability business does not have its own legal identity and the owner(s) are personally responsible for all debts of the business
• Sole trader


  A business that is owned and run by one person
• Sole traders

  • Usually start-ups or small businesses
  • May have employees who work for them
• Unlimited liability


  The business owner or owners are personally responsible for all the debt of the business, no matter what the value
• Income tax


  Tax that someone pays based on their personal income (the money that they earn)
• Advantages of sole trading

  • Quick and easy to set up
  • Sole trader has a lot of control over the business and its money
  • Gives individuals the opportunity to be their own boss and make all the business decisions
  • Low set-up costs
• Disadvantages of sole trading

  • Risk of unlimited liability
  • Can involve long work hours and stressful conditions
  • High level of responsibility for the owner
  • Owner often performs many different roles in the business
• Partnership


  A type of business that has two or more owners who decide to set up and run a business between them
• Partnerships

  • Lawyers
  • Doctors
  • Accountancy practices
• Deed of partnership

  A document that is signed by all of the owners of a business setting out the terms they must abide by and their obligations as owners
• Profits


  The amount of money made after all costs are deducted
• Income tax


  Tax that someone pays based on their personal income (the money that they earn)
• Limited liability


  When the business owner or owners are not personally responsible for all the debt of the business
• Unlimited liability


  When the business owner or owners are personally responsible for all the debt of the business, no matter what the value
• Advantages of partnerships

  • They are usually quick and easy to set up
  • There is shared decision-making by the owners
  • There is shared responsibility for debt by the owners
• Disadvantages of partnerships

  • They can involve long work hours
  • Conflict amongst owners can occur
  • There is the risk of unlimited liability
  • One partner may let the others down by not upholding their responsibilities in the business
• Private Limited Company (Ltd)


  A type of business ownership where the business owner or owners are only responsible for business debts up to the value of their financial investment in the business, and often these types of business have 'Ltd' after the business name
• Examples of businesses that can be set up as a private limited company


  • Plumber
  • Hairdresser
  • Photographer
  • Lawyer
  • Dentist
  • Accountant
  • Driving instructor
• Shareholders


  Part owners of a private or public limited company
• Shares

  A percentage or portion of a company
• Corporation tax


  A tax on the profits of a business
• Companies House

  Where limited companies and partnerships have to register and file annual financial reports
• Advantages of a private limited company

  • Owners have limited liability
  • Gives individuals the opportunity to be their own boss
  • New shareholders need to be invited, which protects the business from outside influence
  • Shares in the business can be sold to raise money
• Disadvantages of a private limited company

  • More paperwork
  • Financial information can be viewed by others
  • Time consuming to set up
  • May require outside professional help to manage finances
• Public Limited Company (Plc)


  Larger businesses may choose to become a public limited company where shares are sold to the public on the stock market. People who own shares are called 'shareholders' and become part owners of the business.
• Public Limited Company (Plc)


  • A chief executive officer (CEO) and board of directors manage and oversee the business' activities
  • When a business sells shares on a stock market, this is known as 'floating on the stock exchange'