Starter  ewsid_ / stm ewsid_ / stm  Watch the following video Beauchamps High School

GCSE Business Studies The Importance of limited liability Beauchamps High School

Will be able to evaluate the effect of unlimited liability Evaluation ~ GCSE Grade A* Will be able to propose differences between a soled trader and partnership Synthesis ~ GCSE Grade A Will be able to analyse business types affected by unlimited/limited liability Analysis ~ GCSE Grade B Will be able to demonstrate understanding by using examples/cases Application ~ GCSE Grade C Will be able to explain unlimited liability Comprehension ~ GCSE Grade D Will be able to recall key term liability Knowledge ~ GCSE Grade E

Liability Beauchamps High School Theory Notes Being legally responsible for debts

Unlimited Liability  Legal obligation on the owner of a business to pay off all debts of the business  No legal distinction between owners personal finances and the finances of a business Beauchamps High School Theory Notes

Sole Trader  Only owner of the business  Have “unlimited liability” so responsible for all debts  Creates risk for owner Beauchamps High School Theory Notes

Private Limited Company  The owners of the company are shareholders  Private Limited Company shareholders are invited to invest (friends/family)  Limited liability means the personal finances of shareholders are completely separate from those of the company Beauchamps High School Theory Notes

Limited Liability  Shareholders of a company are not personally liable for the debts of the company  Most they can lose is the value of their investment in shares Beauchamps High School Theory Notes

Differences between private limited companies and sole traders Private Limited Company Sole Trader LiabilityLimited LiabilityUnlimited Liability Risk Control Profits Privacy Beauchamps High School  Which do you think you have “More” or “Less” with?

Differences between private limited companies and sole traders Beauchamps High School Private Limited Company Sole Trader/Partnership LiabilityLimited LiabilityUnlimited Liability RiskLess risky – only lose share value More risky – could lose business and personal assets ControlLess control– shared with shareholders More control– only owners have all control ProfitsLess profits – shared with shareholders - dividends More profit – owners get all profits PrivacyLess privacy – accounts have to be shared More privacy – no- one has right to see accounts Theory Notes

Against the Clock

Task Beauchamps High School

Task 1. Explain in your own words: a. Limited liability b. Bankrupt 2. Why might an entrepreneur be reluctant to sell more than 50% of the shares in his/her business? 3. Why do you think some businesses may avoid becoming companies and therefore having limited liability? 4. Explain why it is easier to make bold business decisions if your business is a limited company than if it is a sole trader with unlimited liability Beauchamps High School

Task  Practice Question  p142 Beauchamps High School

 -liability/player.html -liability/player.html Beauchamps High School

Plenary

The Chase rules  One student selected to answer a question from lollipop sticks  If a student is unable to answer a question they can select someone else to answer “The Chaser”  Can you beat the chaser and get the high grade!

Recall the key term liability Explain unlimited liability Demonstrate understanding by using examples/cases Analyse business types affected by unlimited/limited liability Propose differences between a soled trader and partnership Evaluate the affect of unlimited liability Can you…..

Will be able to evaluate the effect of unlimited liability Evaluation ~ GCSE Grade A* Will be able to propose differences between a soled trader and partnership Synthesis ~ GCSE Grade A Will be able to analyse business types affected by unlimited/limited liability Analysis ~ GCSE Grade B Will be able to demonstrate understanding by using examples/cases Application ~ GCSE Grade C Will be able to explain unlimited liability Comprehension ~ GCSE Grade D Will be able to recall key term liability Knowledge ~ GCSE Grade E