2.1.3 Flashcards
what is unlimited liability
the owners of a business are liable for all the debts
what is limited liability
the liability of the owners of a business is limited to the fully paid-up value of the share capital
what is unincorporated
the owner is the business (they operate as sole traders)
what is incorporated
A company is a legal entity.The owners of a company are shareholders
what is a sole trader
a business owned by one person
what is a partnership
a form of business in which 2 or more people operate for the common goal of making profit
what is a private limited company(LTD)
a small to medium size business,usually run by the family or the small group of individuals who own it
what is a public limited company (PLC)
a business that is managed by directors and owned by shareholders
3 advantages of a sole trader
- quick and easy to set up
- simple to run
- minimal paper work
3 disadvantages of a sole trader
- unlimited liability
- harder to raise finance
- the business suffers if the owner is absent
3 advantages of partnership
- quite simple
- minimal paperwork
- greater potential to raise finance
3 disadvantages of partnership
- unlimited liability
- complicated to sell or close
- harder to raise finance than a company
3 advantages of a limited company
- limited liability
- easier to raise finance
- stable form of structure
3 disadvantages of a limited company
- greater admin costs
- directors legal duty
- public disclosure of company information
what is a cooperative
co operatives are owned by people who purchase shares in the business.These people are called members
advantage of a co-operatives
-limited liability protection
disadvantage of a co-operative
decision making can be slow as everyone has a vote
what is franchising
franchisor grants a license to a franchisee to allow them to trade under the business brand
3 advantage of franchises
- the business has been successful elsewhere so is less risky
- already have customers (if the franchise is well known)
- franchisors provide initial training and futher advice once the franchise is trading
3 disadvantage of franchises
- no full control over the franchise
- expensive way to start a business
- some franchises run their business badly
