Business 1.4

Who is a sole trader

A business that has only one owner eg. plumbers

What are advantages and disadvantage of sole traders?

Advantages:

• They're easy to set up

• You get to be your own boss.

• You alone decide what happens to any profit.

Disadvantages:

• You might have to work long hours and may not get many holidays.

• You're unincorporated. This means the business doesn't have its own legal identity. So if anyone sues the business, they'll sue you personally.

• You have unlimited liability. This means you are liable (legally responsible) for paying back all of the business' debts if it fails. As you aren't legally separate from the business, your personal finances are at risk

• It can be hard to raise money. Banks see sole traders as risky

What is partnership?

When a business has two or more owners who each have equal say in making decisions and an equal share of profit

What are advantages and disadvantages of partnership?

Advantages:

• More owners means more ideas, and a greater range of skills and expertise

• More people to share the work

• More owners means more capital (money) can be put into the business, so it can grow faster.

  Disadvantages:

• Each partner is legally responsible for what all the other partners do.

• Like sole traders, most partnerships have unlimited liability.

• More owners means more disagreements. You're not the only boss.

• The profits are shared between the partners. So if a sole trader decides to go into partnership with another person, they could end up with less money for themselves.

What are limited companies?

Companies that are owned by shareholders. The more shares you own, the more control you get

There are two types: private and public

It is incorporated- it has a separate legal identity from the owners

The owners have limited liability

What is private limited company?

Private means that shares can only be sold if all the shareholders agree. Private limited companies have Ltd. after their name

What are advantages and disadvantage of Ltd.?

Advantages:

• Limited liability - means you can’t lose more that you invest

• Easier to get a loan or mortgage

Disadvantages:

• More expensive to set up because of all the legal paperwork

• It’s legally obliged to publish its accounts every year

What is franchising?

Where one company (the franchisor) grants another person or business (the franchisee) the right to sell its products or services and use its brand name under a specific agreement

What are advantages and disadvantages of franchising?

Advantages

• Customers will already recognise the franchisor's brand so are more likely to buy from the franchisee. This means there's less risk of the business failing.

• As franchises are less risky, it can be easier to get a bank loan to start up.

• The franchisor might provide the franchisee with training, or help with things like management and accounting.

Disadvantages

• The franchisor might have strict rules about what the business can sell and how it can operate, so the franchisee's freedom is limited.

• The franchisee usually has to pay a lot of money to start the franchise and then make regular payments to the franchisor. These costs may mean they end up with less money than if they started a business from scratch.

What are factors that influence the location of a business?

1. Location of raw materials

2. Labour supply

Competition

Other business might consider

1. Location of the market

2. Using the internet

What are four Ps in marketing?

1. Product

2. Place

3. Price

4. Promotion

What are the factors that can affect a business’s marketing mix?

1. Changes in technology

2. Changes in customer needs

3. Competition

What is a business plan?

An outline of what a business will do, and how it aims to do it

What does the business plan include?

• The business idea

• Aims and objectives

• Target market

• Marketing mix

• Location

• Finance