Advantages of partnerships
- Can raise more capital among additional partners
- Losses can be shared between partners
- Accounts do not have to be published
- Responsibility of management can be shared between partners
- Additional partners bring skills to the business
Advantages of sole traders
- Easy to set up
- Easy to make decisions
- Sole trader has complete control
- Sole trader receives all profits
- Accounts do not have to be published
Define: stakeholder
A person or a business who is affected by the actions of a business
Define: auditor
An independent accountant who examines a business’s accounts on behalf of the owners to show a true and fair view of how the business is performing
Define: bankruptcy
When someone is judged to be unable to pay their liabilities by a court of law
Define: capital
Money invested into the business by the owner
Define: deed of partnership
Formal agreement before beginning a partnership
Define: divorce of ownership
This is when the owners are not involved in the day-to-day running of the business.
Define: incorporation
Process of registering a business as a separate legal identity than its owners
Define: limited liability
The owners are not liable for the company’s debts and can only lose the capital they invested
Define: limited partnerships
A type of partnership where partners are only responsible for the business’s debts, only up to the amount they invested
Define: partnerships
Business having between 2 and 20 owners
Define: private sector organizations
All profit-making businesses that aren’t operated by the government are private sector organizations
Define: public sector organizations
These are the organizations operated by the government usually to provide a service rather than make a profit. They are financed from taxes paid by citizens
Define: sole trader
An individual trading alone under their name or a trading name
Define: unlimited liability
Owner is fully responsible for the debts of the business
Disadvantages of partnerships(5)
- Partners have unlimited liability
- Conflict may arise among partners
- Profit must be shared among partners
- It’s difficult to transfer partnerships
- Partnership is dissolved on the death of a partner
Disadvantages of sole traders(5)
- Sole trader may lack capital
- Sole trader may lack necessary skills
- Unlimited liability
- No continuity
- Making all decisions might be stressful
Examples for sole traders(4)
- Plumber
- Cleaners
- Shop keepers
- Hairdressers
Examples for stakeholders(7)
- Competitors
- Customers
- Suppliers
- Owners
- The government
- Employees
- Managers
Features of a deed of partnership(3)
- It is not required by law
- Can be either verbal or written
- Can help solve arguments later in the partnership
Features of limited partnerships(2)
- There must be at least one partner who is not limited
- All limited partners must be registered with the registrar of companies
Incorporation allows separate legal status; separate legal status allows…(2)
- Limited liability
- Divorce of ownership
What are the two types of limited liability companies within the private sector?(2)
- Public limited companies (plc) / incorporations (inc)
- Private limited companies (Ltd)
