Share 1.4 Types of Businesses
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Identify THREE advantages of operating as a sole trader versus operating as a limited company.
Complete control of business, Keep all profit to yourself, No need to disclose info (besides tax office)
Explain the meaning of unlimited liability.
Owners of a business personally responsible for the debt of the business they own. Their liability is not limited to the investment they made in the business.
Which TWO types of businesses are unincorporated? What does that mean?
sole trader + partnership. The business is not a separate legal entity; there is no continuity if owners pass away
Briefly explain what is meant by an initial public offering (IPO) and the process involved.
Private limited Company becomes PLC via an investment bank. Existing shareholders sell shares to public. Must obtain approvals and disclose loads of info.
Identify the THREE important documents of setting up a limited company are...
Memorandum of Association, Articles of Association, Certificate of Incorporation
A deed of partnership is needed when setting up a partnership. What are THREE things that this deed of partnership might outline?
Amount of capital each partner should provide, voting rights of each partner, rules on taking new partners
The most common form of business is.... because...
Sole trader - easy to set up (fewer legal requirements and documents)
Explain the controls that shareholders have over the board of directors.
Shareholders own, the company, and attend AGMS where they vote for the board of directors
True or false: Sole traders can be subjected to a hostile takeover.
False! A sole trader is owned by one owner!
What are THREE advantages that a private limited company has over a partnership?
Limited liability, incorporated business, more capital available
What is ONE disadvantage that a limited liability partnership has when compared to a public limited company?
Less ability to raise capital, partners spend more time to be actively involved in the business
What are TWO advantages a partnership has over a public limited company?
Partners have greater control of business, greater responsibility, and likely more ownership of business and voting power
