Business Ownership

Private Limited Companies - Advantages & Disadvantages

Groups:

(a) Advantages

,

(b) Disadvantages

• Shareholders may expect a dividend - can cause conflict

• Sale of share is restricted - limits amount of capital that can be raised

• Limited liability

• Banks often more prepared to lend money

• Financial info available to public

• More complex to set up - must register with Companies House

• No chance of takeover without shareholder agreement

Public Limited Companies - Advantages & Disadvantages

Groups:

(a) Advantages

,

(b) Disadvantages

• More complex & expensive to set up - must have £50,000 shares as a minimum

• Financial info available to public

• Limited liability

• Risk of dilution of ownership

• Opportunity for employees to own shares - can increase motivation

• Banks often more prepared to lend money

• Pressure to improve profits

• No control over who buys shares - risk of hostile takeover

• Enhanced public profile and brand recognition

• As shares can be sold to the public, more capital can be raised

Match the following

• capital

• the owners of a private or public limited company

• unlimited liability

• the responsibility for the debts of a business rests with the owners

• limited liability

• the money paid to a shareholder from the profits of a limited company

• dividend

• the money raised to start or develop a business

• shareholders

• the responsibility for the debts of a business is limited to the amount invested by a shareholder

Limited liability is where the responsibility for ​ (a)   of a business is limited to the amount invested by a ​ (b)   . This is a feature of private and ​ (c)   ​ limited companies. ​ (d)   liability is where all responsibility for the debts of a business rests with the ​ (e)   of the business. A feature of sole traders and partnerships.

• debts
• shareholder
• public
• Unlimited
• owners
• stakeholder
• depts
• partners

A sole trader can:

• only employ one person

• employ as many people as the owner wishes

• only employ workers where other workers agree

• not employ workers because it is a sole trader working on their own

A partnership has:

• a maximum of 20 partners

• a maximum of 2 partners

• a minimum of 20 partners

• a minimum of 2 partners

A private limited company:

• is easier to set up than a plc

• is just as difficult to set up as a plc

• always has one main shareholder

• can sell shares to anyone with the agreement of the main shareholder

A public limited company:

• must have a minimum of £500,000 share capital

• must have a minimum of £50,000 share capital

• must have a maximum of £50,000 share capital

• has no minimum share capital

​ (a)   ​ have one owner, are very easy to set up and can make ​ (b)   quickly because there is only one owner. Like partnerships, sole traders have ​ (c)   liability, which means they are personally responsible for all of the ​ (d)   of a business. A partnership would normally have a ​ deed of partnership which sets out the duties of the partners and the amount of ​ (e)   ​ they put into the business.

• decisions
• unlimited
• debts
• limited
• capital
• shares
• Sole traders
• partnerships
• profits