1.5.4 Forms of business

Question 1

What are the key benefits of being a sole trader?

3

Answer 1

• Full control over decisions
• Owner keeps 100% of prof
• > start-up cost, >employees

Question 2

What are the key drawbacks of being a sole trader?

3

Answer 2

• Unlimited liability
• Lack of prestige, >to get finance = limit growth
• > Decision making (no one to discuss w)

Question 3

What can happen with unlimited liability?

1

Answer 3

• Business = bust, owner forced to sell their personal assets to repay creditors

Question 4

What are the key benefits of being a partnership?

4

Answer 4

• ^Owners = ^finance raised
• Varied skills/exp, networks
• Share responsibility
• ^decision (+perspective)

Question 5

What are the key drawbacks of being a partnership?

4

Answer 5

• Unlimited liability
• Differences/conflict
• Profits shared
• Slow decision making

Question 6

Why is it wrong to say private limited companies (Ltd) keep their accounts hidden from public view?
1

Answer 6

• All limited companies have to send simplified copy of their accounts to Companies House

Question 7

What are the benefits of being a private limited company (Ltd)?
3

Answer 7

• Tax relief (capped at 20% income tax)
• Limited liability
• ^Access to finance

Question 8

What are the key drawbacks of being a private limited company (Ltd)?
3

Answer 8

• Public access financial accounts, ^scrutiny, >finance
• ^Legal formalities (accounts independently audited each yr, v costly)
• Ownership issues

Question 9

What are the key benefits of being a public limited company (PLC)?
3

Answer 9

• Limited liability
• Sell shares via stock market to public = ^share capital
• ^Credibility as public, ^raise finance

Question 10

What are the key drawbacks of being a public limited company (PLC)?
4

Answer 10

• Start-up = min £50,000
• Sensitive info revealed
• Dilution of control
• Short termism (pressure)

Question 11

What is a franchise?

1

Answer 11

• License to use another business’ name in return for payment

Question 12

What is a franchisor?

1

Answer 12

• Business that sells the right to use it’s name

Question 13

What is a franchisee?

1

Answer 13

• Company that buys a license to use another business’s name

Question 14

What are the benefits of franchising for the franchisee?

3

Answer 14

• Franchisor provides mats
• Advice/training on all business functions
• ^Access loans, banks see >risk

Question 15

What are the drawbacks of franchising for the franchisee?

3

Answer 15

• Can’t make decisions
• Initial franchise fee, buy license
• Franchisor expect royalties (% of rev)

Question 16

Why may someone start a social enterprise?

1

Answer 16

• Desire to fix social problem (not profit)

Question 17

What are the benefits of an online business?

4

Answer 17

• > Costs (no physical premises, >staff)
• ^Rev (sell worldwide)
• ^Customer service
• Cookies mean advertising = ^direct

Question 18

What are the drawbacks of an online business?

3

Answer 18

• Security issues (hack/theft)
• ^Comp
• Loss due to downtime