Chapter 16-Getting started

Question 1

Types of ownership

Answer 1

Sole trader
Partnership
Private limited companies
Co-operatives

Question 2

Limited liability

Answer 2

Owners are not personally liable for the debts incurred by the business

They can not lose more than what was invested

Question 3

Unlimited liability

Answer 3

Owners **are personally liable for debts **incurred by business. Personal assets at risk

May have to sell personal assets or possessions and may fall bankrupt

Question 4

Sole trader

Answer 4

Business owned/managed by one person (may have several employees)

Question 5

Advantages of Sole Trader

Answer 5

Control- how business is operated + decisions

Profits- all if not majority of profits go to u

Easy to set up- once name is registered, it’s free to start trading. Does not invole gov registration fees

Question 6

Disadvantages of sole trader

Answer 6

Unlimited liability- owner is liable for debts incurred by business

Holidays- hard to take days off if you’re only in charge

Stress- all responsibility is on u

Question 7

Partnership

Answer 7

A business with 2-20people operated with people with a common goal of making a profit

Question 8

Partnership advantages

Answer 8

Easy to set up-very few procedures to follow once set up

Less stress- responsibility is shared

Specialisation of partners-better decision making + more efficiency

Question 9

Partnership disadvantages

Answer 9

Less control- decisions are shared + may take longer (arguements)

unlimited liability

limited partners- only a max of 20 limits business of growth

Question 10

Private limited company

Answer 10

-1-149 people with limited liability

-ran by board of directors which are elected by shareholder

-appoint a CEO or MD

-hold agms ( hear business reports + vote on matters)

Question 11

Private limited company adv

Answer 11

limited liability

continuity of existence- business is independent meaning it will still operate + exist even if a shareholder dies

Increased capital- ability to increase capital as business can sell up to 149 shares

Question 12

Private limited company disadv

Answer 12

complex to set up- lots of legal documents once set up

profits- must be shared

finance- stocks can’t be traded on stock exchange. Limiting finance

Question 13

Co operative

Answer 13

-A business operated by people with common goal/bond
-Must have atleast 1 share to be a member
-Profits are split as dividends
-ran by community management

Question 14

Advantages of Co-op

Answer 14

Limited liability

Increase access to capital- due to unlimited shareholders

Democracy- everyone has one vote regardless of how many shares

Question 15

Disadvantages of co-ops

Answer 15

Slow expansion-as you only need to buy one share to become a member,people may not want to buy more.

profits must be shared

Lack of confidentiality - must post annual financial accounts