Learn Unit 1, Section 1.4 Choosing the right legal structure

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1. Explain what is meant by a sole trader
This is where a person works for themselves.
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2. Explain what is meant by a partnership
This is where 2-20 people own a business together.
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3. Explain what is meant by a private limited company
This is where a business sells shares to family and friends. They have limited liability.
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4. Explain what is meant by a public limited company
This is where a business sells shares on the stock market.
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5. What is meant by limited liability?
Shareholders do not lose their possessions if the business runs into financial difficulties. They just lose the money they invested to buy the shares.
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6. State three benefits of moving from a sole trader to a partnership
1. Different skills 2. Someone to cover for sickness and holidays, allowing the business to stay open 3. More ideas
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7. State two benefits of moving from a partnership to a private limited company
1. Gain limited liability 2. Can generate capital from selling shares. You can use this money to grow your business.
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8. State two benefits of moving from a private limited company to a public limited company.
1. Can generate a lot of money from selling shares on the stock market 2. Status with suppliers and customers
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9. State three downsides of being a private limited company
1. Shareholders will want a say in the business 2. More difficult to set up than being a sole trader 3. Share profits with shareholders
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10. State four downsides of being a public limited company
1. Risk of losing control. Competitors may try to buy out your company. 2. Have to publish your financial records to the public, which you don't have to do if you stay as a private limited company 3. More media attention 4. Share profits
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Other cards in this set

Card 2

Front

2. Explain what is meant by a partnership

Back

This is where 2-20 people own a business together.

Card 3

Front

3. Explain what is meant by a private limited company

Back

Preview of the front of card 3

Card 4

Front

4. Explain what is meant by a public limited company

Back

Preview of the front of card 4

Card 5

Front

5. What is meant by limited liability?

Back

Preview of the front of card 5
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