(a) Define the term limited liability (b) Describe four differences between a public joint-stock company and a private joint-stock company (c) Outline three...
(a) Define the term limited liability (b) Describe four differences between a public joint-stock company and a private joint-stock company (c) Outline three sources of finance available to sole proprietorship
(a) Limited liability is a legal concept that protects the personal assets of business owners from being used to pay off business debts or legal claims. It means that the owners of a business, such as shareholders in a company, are only liable for the debts of the business up to the amount of their investment or shareholding. They are not personally responsible for any debts or liabilities that exceed their investment.
(b) Public joint-stock companies and private joint-stock companies have several differences, including:
Ownership: A public joint-stock company can have an unlimited number of shareholders, while a private joint-stock company has a limited number of shareholders.
Share transferability: Shares in a public joint-stock company can be freely traded on a stock exchange, while shares in a private joint-stock company cannot be traded on a stock exchange.
Disclosure requirements: Public joint-stock companies are required to disclose more information to the public than private joint-stock companies, such as financial statements and ownership details.
Access to capital: Public joint-stock companies can raise capital more easily through issuing shares to the public, while private joint-stock companies have limited options for raising capital.
(c) Sole proprietorships can access several sources of finance, including:
Personal savings: The owner of a sole proprietorship can use their own savings to finance the business.
Loans: Sole proprietors can apply for loans from banks or other financial institutions to finance their business operations.
Credit cards: Some sole proprietors may use credit cards to cover business expenses, although this can be risky due to high interest rates.
In summary, limited liability protects business owners from personal liability for business debts, public and private joint-stock companies differ in terms of ownership, share transferability, disclosure requirements, and access to capital, and sole proprietors can access finance from personal savings, loans, and credit cards.
(a) Limited liability is a legal concept that protects the personal assets of business owners from being used to pay off business debts or legal claims. It means that the owners of a business, such as shareholders in a company, are only liable for the debts of the business up to the amount of their investment or shareholding. They are not personally responsible for any debts or liabilities that exceed their investment.
(b) Public joint-stock companies and private joint-stock companies have several differences, including:
Ownership: A public joint-stock company can have an unlimited number of shareholders, while a private joint-stock company has a limited number of shareholders.
Share transferability: Shares in a public joint-stock company can be freely traded on a stock exchange, while shares in a private joint-stock company cannot be traded on a stock exchange.
Disclosure requirements: Public joint-stock companies are required to disclose more information to the public than private joint-stock companies, such as financial statements and ownership details.
Access to capital: Public joint-stock companies can raise capital more easily through issuing shares to the public, while private joint-stock companies have limited options for raising capital.
(c) Sole proprietorships can access several sources of finance, including:
Personal savings: The owner of a sole proprietorship can use their own savings to finance the business.
Loans: Sole proprietors can apply for loans from banks or other financial institutions to finance their business operations.
Credit cards: Some sole proprietors may use credit cards to cover business expenses, although this can be risky due to high interest rates.
In summary, limited liability protects business owners from personal liability for business debts, public and private joint-stock companies differ in terms of ownership, share transferability, disclosure requirements, and access to capital, and sole proprietors can access finance from personal savings, loans, and credit cards.