1.5.4 Forms of Business Flashcards
What are the Different forms of business?
Sole traders
Partnership
Private limited companies
Public limited companies
What type of liablility does a Sole trader have?
A sole trader has unlimited liability
Whate are some benefits of being a Sole trader?
Cheap and easy to set up All profits go to the sole trader Autonomy in decision making Financial records remain private Motivation is high as the success of the individual and the business are one and the same
Whate are some Disadvantages of being a Sole trader?
Unlimited liability
Limited capital for investment
Little specialist skills as the owner is a ‘jack of all trades’ or will have to buy in specialists
Difficult to find cover when ill – although sole traders often do employ people
What is a partnership?
A partnership is where two or more people share the costs, risks and responsibilities of being in business together
What type of liablility do partnerships have?
unlimited liability
What are some benefits of a partnership?
Risks, costs and responsibilities are shared
More scope for specialist skills
Simple and flexible
Financial records remain private
More capital can be raised than as a sole trader
What are some disadvantages of a partnership?
Unlimited liability
Arguments can occur with decision making
If a partner dies, resigns or goes bankrupt the partnership is dissolved
Trust becomes a significant element between partners – a written agreement between the partners should be drawn up
Do limmited companies have to be registerd?
Yes, Companies must be registered (Incorporated) at Companies House.
What must private limmited companies have after there name?
LTD
What are some advantages of Private Limmited Companies?
Limited Liability
Separate legal identity
More flexible than a Plc.
Financial records remain relatively private
More capital can be raised through the sale of shares
What are some disadvantages of Private Limmited Companies?
More complex to set up due to increased legal requirements
Some loss of control as shareholders have voting rights
Unable to sell shares to the public
What is a franchise?
A franchise is when one business, the franchisor, gives another business, the franchisee, permission to trade using the franchisors name and selling the franchisors goods or services
How do franchises work?
The franchisee pays an initial fee to the franchisor
The franchisee pays an annual fee to the franchisor
The franchisee often has to buy supplies from the franchisor
The franchisee pays for a proven ‘business format’
The franchisee can use a well recognised name and brand
The franchisor must support the franchisee in a range of areas
What are benefits of being a franchise?
Rapid expansion
Cheap Investment
Motivation – franchisee has own capital tied up in business
Economies of scale
