theme 1 - 1.5.4

what is a business form

it’s the lag structure that a b takes - EG; sole trader , partnership , private + public limited company

what is a sole trader

a b owner and controlled by a single individual ( though staff may be employed but not in control of b ) - being a unlimited liability

what are the advantges of sole trader

• simple + inexpensive to set up having full control of DM with finial info remaining private

• allows them to keep all profits + retained earning stay with entrepreneurs

• can provide personal services → customer loyalty

what are the disadvantages of sole trader

• unlimited ability → huge financial risk

• no EOS → higher average cost + narrow skill set → lacking expertise in B functions

• limited access to finding → seen as risky by lenders so no equity finances

What is a partnership

2 or more indivualds own a b together , who share risk , cost , profit , repsnisbilities

• having unlimited liability

What are the advantges of partnership

• more finance availible than sole trader → partners can pool saving / capital

• broader skills + expenses ( marketing + finances ) + having shred repsobislity → decreases workload + stress

• simple to set up with info remaining private and is also motivating dor partners as gain profits directly

what are the disadvantages of partnership

• unlimited liability → huge financial risk

• potential dispute over DM , profit sharing , strategy

• instability if one leaves making it diffuclt to transfer ownership as requires agreement of all partners

what is a private limited company

a company is owned by shareholders , usually family + freinds . shares not sold publicly

• limited liability as only risk capital invested

• having separate legal entity from owner

what are the advantges of private limited company

• easier to raise finance by selling shares to close contacts

• professional status → greater credibility with banks / suppliers

• ownership / control is maintained as share sold privately not on stock market

what are the disadvantes of private limited company

• complicated , costly , time consuming set up ( legal documents + registration )

• can’t set shares on stock exchange → limits financial growth

• more administrate burdens + regulations than sole trader / partnership

what is a public limited company

a company’s who’s shares are traded on stock exchange and can be purchased by genral public

• limited liability for shareholders

What are the advantges of a public limited company

• access to vast amount of capital → flotation raises large equity finance quickly allowing spread risk across many sharhoelrs

• higher public profile → stronger brand , attract suppliers / investors

• can recruit experiences managers → enhancing strategic DM

what are the disadvantes of public limited company

• finical information must be fully disclosed → competitors gain insight

• separation of ownership + control → conflict with shareholders + directors - as priorities ST profits / dividend over LT strategy

• expensive , complex , time consuming to set up ( lawyers + admire cost )

What is franchising

agreement where franchisee buys the right to operate under franchisees brand , receiving support in exchange in support fot fees / royalties

what are the advantges of franchisee

• lower risk strategy up → proven b model

• immediate brand recognition → customers trust brand so easier to access finance

• franchisees provide training , marketing support , operational guidance

what are the disadvantages of franchising

• lack of independence → must follow rules ( products , price )

• initial franchise fee + ongoing royalties reduces profit as no outright ownership

• poor peformemance by other franchisees can damage brand reputations

what is a social enterprise

a b set up to trade for social / environmental purpose while still earning revenue

What is a life style business

b created to sustain a desired standard living / personal interest , not necessarily to maximise profit