1.4: Making the business effective Flashcards
What does ‘liability’ mean?
the legal responsibility of a business towards its debts
What is limited liability?
the owner and the business are separate legal entities. any debts incurred by the business belong to the business. owners can only lose the money they invested. their personal belongings are not liable
- private limited companies
What is unlimited liability?
the owner is legally responsible for any debts of the business
- sole traders
What are the 3 types of business ownership?
sole trader
partnership
private limited company (ltd)
What are the advantages of sole traders?
full control
quick and easy to set up
keep all the profits
financial info kept private
What are the disadvantages of sole traders?
unlimited liability
harder to raise money to start or grow the business
a lot of pressure
lack of security
What are the advantages of a partnership?
owners may have a wider range of ideas and skills
owners share the risk
could be easier to raise finance to grow business
What are the disadvantages of a partnership?
decisions can affect all partners
no longer exists if one partner leaves
profits are shared
partners may disagree
What are the advantages of a private limited company?
limited liability
more customer trust
continues to trade even if shareholders change
could be easier to raise finance to grow business
What are the disadvantages of a private limited company?
more complex to set up
shareholders may disagree
financial info published
more info must be reported to the government
What is a franchise?
the right given by one business to other businesses to sell goods or services using its name
What is a franchisor?
the business that gives franchisees the right to sell its product or service
What is a franchisee?
a business that agrees to manufacture, distribute or provide a branded product under licence from a franchisor
What does the franchisee get when they buy a franchise?
an established brand name
training
equipment
ongoing support
access to goods and services
advertising and promotion
operate in an exclusive area
What are the benefits of running a franchise?
brand image and rep already established
expensive marketing costs covered
access to tried and tested products
may have an established customer base
higher chance of survival
specific support and training provided
