the options for start up and small business

define limited liability

where shareholders and owners only lose the amount of money that they have invested into the business if the business fails, it applies to both public and private limited company.

define unlimited liability

if the business fails the owners have to pay all debts and might have to use their own personal assets.

why does limited liability matter in business decisions

encourages investment

reduces personal financial risk

protects personal assets

what are the types of business ownership

shareholder

partnership

private limited company

define shareholder, is it unlimited or limited and advantages and disadvantages

where there is only one owner it has full control of the business

unlimited liability

advantages

• easy to set up

• full control of business

disadvantages

• high personal financial risk

• lots of work

define partnership, is ti unlimited or limited and advantages and disadvantage

where there is more than one owner

unlimited liability

advantages

• shared skills

• less work than soletrader

disadvantages

• slower decision making

• dividend

define private limited company, is it limited or unlimited and advantages and disadnvatages

when shares are sold privately

limited liability

advantages

• limited liability

• control can be maintained

disadvantages

• much more paperwork and cost start

• business accounts are not 100% kept private

define franchising

when franchisor allows franchisee to trade under its brand

define franchisor

the original business that owns the brand and has the right to sell it

define franchisee

person or business that buys the right to operate under the brand that they purchase.

define royalty

regular payment that the franchisee has to make and give it to the franchisor, it is usually a percentage of the revenue.

define business format

full setup on how the business runs

how does franchising works

franchisor owns the brand

the franchisee pays a start up fee to use the brand

franchisee also pays royalties

franchisor gives the franchisee

• training

• marketing

• products

• location to operate in

what are the advantages and disadvagnes of the franchisor

advantages

• expand quickly

• keep control

disadvantages

• reputation damages if franchisor doesnt perform good

• doesnt keep all profits only royalties

advantages and disadvantages of franchisee

advantages

• higher chance of success since business gives its model

• gets support by the franchisor such as training, location to operate products etc.

advantages

• must pay royalties that lower profit

• franchisor makes major decisions.