Section 1, Chapter 2
- Created by: siangrace15
- Created on: 18-11-19 20:37
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- Chapter 2: Different business forms
- businesses with unlimited liability
- Unlimited liability: the finances of the business are treated as inseparable from the finances of the business owner(s)
- Sole trader: an individual who owns and operates his or her own business
- partnerships exists when two or more people start a business without forming a company
- businesses with limited liability
- Limited liability: the legal duty to pay debts run up by a business stays with the business itself, not its owner/shareholders
- to gain benefits, the business must go through incorporation
- Incorportation: creates a separate legal identity for the organisation
- advantages
- shareholders experience the benefits of limited liability including the confidence to expand
- able to gain access to a wider range of borrowing opportunities
- disadvantages
- must make financial information available publicly on Companies House
- have to follow more expensive rules than unlimited liability businesses
- private limited companies
- the start-up capital will often be £100 which can be wholly earned by the entrepreneur, or other people can be brough in as investors
- the shares cannot be bought and sold without the agreements of other directors
- must state Ltd after the name
- Public limited companies
- when a Ltd expands to the point of having share capital of more than £50 000, it can convert to a Plc
- other forms of organisations
- Co-operatives
- Non-profit organisations
- Mutual businesses
- Charities
- businesses with unlimited liability
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