1.4.1 The options for business start ups Flashcards
Limited Liability
Business owners are only responsible for business debts up to their own investment in the business. The business and owner are seen as separate identities
Unlimited Liability
Business owner and Business are one identity and all debts are the owners responsibility
Sole Trader
Business owned and ran by one person. Unlimited Liability. Employees may work for the owner
Quick and easy to set up, makes own decisions, keeps all profits
Unlimited Liability, Works long hours, high levels of responsibility
Partnership
A business that has 2 or more owners (usually up to 20). Often are businesses that provide professional services like a law firm. Rules of the partnership for each business is set out in their deed of partnership. Limited Liability
Quick and Easy to set up, shared decision making between owners, shared responsibility for debts by owners
Long work hours, conflict amongst owners, risk of unlimited liability, one partner may let others down by not holding up their end of the agreement
Private Limited Company (Ltd)
Small or large Business. Limited Liability. Owners are known as shareholders and are invited to the business before they can purchase a share. Corporation tax is paid on all profits. Company has to be registered with Companies House
Limited Liability, opportunity to be own boss, protected from outside influence of shareholders, shares can be sold to raise money for business
More paperwork, financial information often public, time consuming to set up, require professional help with finances
Public Limited Company (PLC)
Limited Liability. Shares are sold on public stock exchange
Able to sell shares to raise funds
Loss of control as share are sold, share can be brought by anyone
Franchise
The right given by one business to another to another to sell goods using its name. Often a fee and percentage of earnings taken.
Franchisee often gets free marketing and training, already an established business, lower risk
Expensive to set up, franchisee cannot make decisions without consulting franchisor, royalties paid
Franchisor
A business that gives franchisees the right to manufacture, distribute or sell its branded products in return for a fixed sum of money or royalty payment
Franchisee
A business that agrees to manufacture, distribute or sell branded products under the license of a franchisor
