When individuals or groups of people decide to pursue their own passions, want flexibility and control over their work, to be their own boss or fill a gap in the market
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What is a Sole Trader?
A self-employed person who owns and runs their own business as an individual, being liable for their own financial risks and the daily operations of their business
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An advantage of a sole trader is..
Sole Traders make all the decisions for the running of their business and does not have to discuss with others- they are completely in control
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Another advantage of a sole trader is....
Sole trader businesses are easier for the owner to setup as it does not require legal documentations
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A disadvantage of a sole trader...
Sole trader businesses have UNLIMITED LIABILITY- means owner is responsible for all debts of the business and may have to use their own money to pay outstanding creditors
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Another disadvantage of a sole trader business..
May be difficult for Sole Trader to compete with larger businesses due to higher price and no benefit of economies of scale
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What is a Partnership?
A formal agreement made between two or more people to jointly manage and operate a company/business- they share workload and responsibilities of the business
(Min-2 Max-20)
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An advantage of a partnership...
More capital- allows the business to expand
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Another advantage of a partnership..
Division of labour amongst partners- leads to greater expertise
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A disadvantage of a partnership..
UNLIMITED LIABILITY- each partner is equally liable for debts of business
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Disadvantage of partnership...
Decision-making may be complicated as there's possibility of conflict between partners in business
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What is a Private Limited Company (LTD)?
A larger company- shares are owned privately or by, eg- family or friends in the business
**LTDs must also be registered by Registrar of Companies and Companies House**
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Advantage of a private limited company...
Higher capital available (much greater than Sole Traders and Partnership businesses)
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Another advantage of private limited companies..
LIMITED LIABILITY- means shareholders of this business are only responsible for debts equal to the share value
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Disadvantage of private limited company...
More expensive and complicated to setup as it requires loads of legal documentations and procedures
(eg- Articles of Association, Memorandum of Association)
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Another disadvantage of private limited companies...
Some financial information must be available for inspection by members of the public- may give competitors an insight into the affairs (finances) of the company
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What is a Public Limited Company (PLC)?
The largest type of limited company- this type of company is managed by Directors and owned by Shareholders (public)
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Advantage of a Public limited company..
Shareholders of this company have LIMITED LIABILITY- means 'investors' and 'owners' private assets aren't at risk if the business fails or gets sued
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Another advantage of a PLC...
Necessary resources (capital) available within the company for growth and expansion in this company
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A disadvantage of a PLC...
Shareholders own the company, but the directors and managers can only make the business decsions
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Another disadvantage of a PLC...
Financial information of the PLC must be published for the general public to view (means rival companies have easy access to the finances of the company)
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What does UNLIMITED LIABILITY mean?..
If the business fails/gets sued, each business owner is liable for any debts or compensation
(Sole Traders and Partnerships have unlimited liability)
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What does LIMITED LIABILITY mean?..
If the business fails/gets sued, owners and shareholders assets are not affected as the money which they are liable to pay out is limited
(PLCs and LTDs have limited liability)
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Other cards in this set
Card 2
Front
What is a Sole Trader?
Back
A self-employed person who owns and runs their own business as an individual, being liable for their own financial risks and the daily operations of their business
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