11804590
Description
Flashcards by Virginia Vidal, updated more than 1 year ago
More
| Question | Answer |
| What is a sole trader? | A business that is fully owned by one person. |
| Advantages of being a sole trader? | >Full control over decision making. >Get to keep all the profits. >Financial privacy >Flexibility >Business can be set up quickly, easily and inexpensively. > Closer relationship with your customers |
| Disadvantages of being a sole trader? | >Unlimited Liabilility of the owner >No economies of scale >Limited capital makes it hard to expand the business >Lack of continuity >Long hours of work and few holidays >Business ceases to exist if owner dies or retires >Limited expertise and know-how |
| What is a Partnership? | A business that is owned by 2-20 people. |
| Advantages of a partnership? | >More effective decision-making. >Shared workload >Specialisation-people with expertise in different areas >More people who can contribute capital |
| Disadvantages of a partnership? | >Unlimited Liablilty >Shared profits >Ceases to exist if one of the partners leaves >Possible disputes between partners >Partners are jointly and severally liable |
| What is the document that should be drawn up when a partnership is formed? | >The partnership agreement or deed of partnership. -It should include name and function of the partnership, the names of the members, capital invested, profit ratio, rules for ending the partnership |
| Name two types of partnerships | general partnership and limited partnership |
| What is the difference between these two types of partnerships? | A limited partnership has two types of partners: general partners and limited partners |
| What is a silent or sleeping partner? | A limited partner who has invested capital in a limited partnership but isn't involved in the running of the business. |
| What is a limited company? | A company which is a separate legal entity from its owners. |
| What is an LTD? | A private limited company: ie, a limited company with shares that cannot be bought by the public. |
| What is a PLC? | A public limited company: ie, a limited company whose shares can be bought by the public, i.e. traded publicly. |
| Advantages of an LTD? | >Continuity >Limited Liability of shareholders >its members have more control over decisions than in a PLC >Raising Capital is easier |
| Disadvantages of an LTD? | >Shared Profits >Lack of financial privacy >Limit on capital >Set up costs >More legal requirements to comply with > Profits are taxed twice: at corporate level and personal level (tax on dividends) |
| Advantages of a PLC? | >Raising large amounts of capital is easier because shares can be sold publicly >Limited Liability of its shareholders >Continuity |
| Disadvantages of a PLC? | >Vulnerable to hostile takeovers >Control of the company is in the hands of the directors, not the shareholders >Set up costs are high >No financial privacy; accounting records must be published |
| What are the two documents required to set up a Limited company? | 1. The "Memorandum of Association." >Basic info. about the company, principally of interest to outsiders eg. name, function, objects 2. The "Articles of Association." >Basically the internal regulations of the company eg. How board meetings will work, how profits will be split, duties of the directors |
| Examples of Internal sources of finance? | >Owners' Investment >Sale of fixed assets and stock >Debt Collection >Retained profits (= reserves) |
| Examples of External sources of finance. | >hire-purchase (small payments until asset is paid off.) >issue of shares and bonds >bank loans & overdrafts >government grants and subsidies >leasing >trade credit (buy goods now, pay later) |
| What is the difference between a stockholder and a stakeholder? | A stockholder is another word for shareholder, one of the owners of the company. A stakeholder is anyone who can affect or be affected by the organization's actions, objectives and policies. |
| What is a stakeholder? | Anyone with an interest in the business who can be affected by the organization's actions, objectives and policies. EXAMPLES: creditors, directors, employees, government , owners (shareholders), suppliers, unions, and the community from which the business draws its resources. |
| Examples of internal stakeholders | Shareholders, managers and employees |
| Examples of external stakeholders | customers, suppliers, community, competitors, creditors, government, |
Want to create your own Flashcards for free with GoConqr? Learn more.