1.5.4 Forms Of Business ****** Flashcards
Define sole trader
A business organisation which has a single owner
Advantages of being a sole trader
- owner keeps all profit
- owner has complete control
- business is flexible
- may qualify for government help
Disadvantages of being a sole trader
- owner has unlimited liability
- owner may struggle to raise finance
- owner and employees have long hours
Define partnership
A business organisation usually owned by 2-20 people
Advantages of partnerships
- easy to set up and run
- partners can specialise in their area of expertise
- more owners can raise more capitals
Disadvantages of partnerships
- partners have unlimited liability
- partners have to share the profit
- one partners decision is legally binding on all other partners
What is the deed of partnership?
A binding legal document that states the formal rights of partners
Define private limited company (ltd)
Shares can only be sold to friends and family
Advantages of private limited company
- limited liability
- raise capital by selling shares
- has its own legal status
Disadvantages of private limited company
- accounts of the company cannot be kept private
- expensive to set up
- can’t sell shares on stock exchange which limits capital
Define franchise
A business idea which is sold to other owners who run it under a license and pay royalties, in return they get branding and market support.
Advantages of a franchise
- franchiser decides how much money to invest in the business
- franchiser provides support, management advice and training
Disadvantages of a franchise
- don’t have the freedom of running their own business
- franchise will never owe the business outright
What is social enterprise?
A business that trades for a social or environmental purpose
What are the aims of a lifestyle business?
To provide great quality of life for the owner and grow big enough to provide a return of investment.
