Studied by 0 peopleWhat is a sole trader?
An individual who runs their own business and is registered as self-employed by the HMRC
What are advantages of being a sole trader?
Cheap and easy to set up
Get all profits
Autonomy with decisions
Motivation is high as success of the business and the individual are the same
What are disadvantages of being a sole trader?
Unlimited liability
Limited capital for investment
Will have to buy specialists
Hard to find cover when ill
What is a partnership?
Where two or more people share the costs, risks and responsibility of being in the business together
What are advantages of being a partnership?
Risks, costs and responsibilities are shared
More specialist skills
Flexible
More capital raised than as a sole trader
What are some disadvantages of being a partnership?
Unlimited liability
Arguments can occur in decision making
If anything happens to the partner then the partnership is dissolved
Must have significant trust
What is a private limited company?
Owned by shareholders who are known to the company. Shares cannot be sold to the public, only to family and friends
What are advantages of being a private limited company?
Limited liability
Separate legal identity
More capital raised through the sale of shares
More flexible than a PLC
What are disadvantages of being a private limited company?
More complex to set up due to increased legal requirements
Some loss of control as shareholders have voting rights
Unable to sell shares to the public
What is a public limited company?
A business where shares can be sold openly on the stock exchange, there is normally separate ownership and control (shareholders own the company but management runs the company)
What are advantages of being a public limited company?
Limited liability
Separate legal identity
Financial records remain relatively private
More capital can be raised through the sale of shares
What are disadvantages of being a public limited company?
Lack of privacy as financial performance is available for all to view
More complex to set up due to increased legal requirements and ongoing administrative costs
Some loss of control as shareholders have voting rights
Risk of hostile takeovers
What is a limited company?
A business that is incorporated at companies house and has a memorandum of association, article of association, form 10 and form 12
What is franchising?
The replication of a successful business formula by giving permission to franchisees to trade using its name or goods in return for a fee and share of profits
What are advantages of being a franchisor?
Rapid expansion (maximises profitability)
Cheap investment
Motivation (franchisee has capital tied up in the business)
Economies of scale
What are disadvantages of being a franchisor?
Loss of control
Have to manage growth
Litigation (a failed franchisee is a court case waiting to happen)
What are advantages of being a franchisee?
Lower risk
Established product and firm
Brand awareness
Proven operation
Assistance with everything
What are disadvantages of being a franchisee?
Lack of control
Higher than expected costs (e.g. start-up, supplies, franchise renewals)
What is a social enterprise?
Where the objective is not profit, but rather doing good for society
What is a lifestyle business?
When entrepreneurs run a business to suit and meet the needs of their own lifestyles
Objectives are likely to be based around profit satisficing, independence and work-life balance
What is an online business?
A business that trades in a virtual marketplace
Advances in technology has led to an increase in these
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