1.4 making the business effective

fave topic in paper 1

What’s a sole trader?/?

when a business is owned & ran by 1 person

—>may have employees who work for them

they have unlimited liability and have to pay their own income tax

Unlimited liability

all responsibility on business owners. for example, sole traders.

→ if a business went £60,000 in debts etc, owner is personally responsible for allat

limited liability

business owners only responsible for their investment.

• layer of protection for business owners.

• own shares, therefore only lose any investments made

• personal finances & possessions are protected.

for example, shareholders

franchisee

a business that agrees to manufacture & distribute under license of franchisor. eg your local McDonalds

advantages: easier to make money & lower risk

disadvantage: pay percentage of profit to franchisor (known as royalties)

franchisor:

business which gives franchisees the right to manufacture under its name eg. McDonald’s HQ

——→ franchisees cannot make individual decisions without consulting the franchisor

What influences a business to choose its business location?

→ availability of raw materials

→ competition - being near competition means being closer to suppliers

→ rent

→ low labor costs