Ownership and Liability Flashcards

1️⃣ Familiarise yourself with the flashcards:

  • Look through all the flashcards to see what's on both sides.
  • Make sure you understand the information on each card. If something's unclear, click the link to the revision notes at the bottom of the page for more details.

2️⃣ Test yourself:

  • Look at the question or prompt on each card and try to remember the answer before flipping it over.
  • Check the answer and make a note of any cards you find challenging and need to go over more.

3️⃣ Consistently Review and Practice:

  • Use spaced repetition: spend more time on the cards you struggle with and go over them more often.
  • Regularly review all the flashcards to help you better understand and retain the information over time.

Note: We may include questions that have multiple correct answers. It's useful to remember specific examples to understand these concepts better.

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What is a sole trader?

A business owned and run by one person.

What is a partnership?

A business owned by two or more people who share profits and decisions.

What is a private limited company (Ltd)?

A company owned by shareholders. Its shares are not sold to the public.

What is a public limited company (plc)?

A company that can sell shares to the public.

What does limited liability mean?

Owners only risk the money they invest. Their personal assets are not used to pay business debts.

What does unlimited liability mean?

Owners must pay all business debts. They may have to use personal savings and property.

Which business types have limited and unlimited liability?

Sole traders and partnerships have unlimited liability. Ltd and plc companies have limited liability.

What does separate legal entity mean?

The company is separate from its owners. It can own property, make contracts, and be sued in its own name.

What is incorporation?

Registering a company with Companies House. This makes it a separate legal entity and gives limited liability.

Who is a shareholder?

A person or business that owns shares in a company.

What is a dividend?

A payment of part of a company's profit to its shareholders.

Why might an entrepreneur choose limited liability?

It reduces personal risk if the business fails. Only the money invested is at risk.