26. Forms of business Flashcards
1
Q
Forms of business:
A
- Sole traders
- Partnerships
- Limited partnerships
- Limited companies
- Private limited companies
- Franchising
- Social enterprises
- Lifestyle businesses
- Online businesses
2
Q
Advantages of operating as a sole trader:
A
- The owner keeps all the profit
- The business is independent and the owner has a complete control
- The business is simple to set up, with no legal requirements
- The business can be flexible and can adapt to change quickly
- The business can offer a personal service because it is small
- The business may qualify for government help
3
Q
Disadvantages of operating as a sole trader:
A
- The owner has unlimited liability
- The owner may struggle to raise finance, as lenders may consider them too risky to offer credit
- Independence may be a burden, for example if an owner is ill
- The owner and any employees are likely to work very hard, with long hours
- The business is usually too small to exploit economies of scale
- The business cannot be continued if the owner passes away
4
Q
Advantages of partnerships:
A
- The partnership is easy to set up and run, with no legal requirements
- Partners can specialise in their area of expertise
- Partners share the burden of running the business
- More owners can raise more capital
- The partnership does not have to publish financial information
5
Q
Limited companies:
A
- Capital is raised by selling shares
- Unlike sole traders or partnerships. the owners have limited liability
- Limited companies are run by directors who are elected by the shareholders
- Pay corporation tax and not tax on profits
- To form a limited company the memorandum of association and the article of association must be sent
6
Q
Advantages of private limited companies:
A
- Shareholders have limited liability
- More capital can be raised by issuing shares
- Control over the business cannot be lost to outsiders
- The owners have tax advantages. Owners may pay less tax, for example.
- Private limited companies are considered to have a higher status than some other types of business organisations, such as a sole trader.
7
Q
Disadvantages of private limited companies:
A
- Private limited companies have to publish their financial information
- Setting-up costs have to be met
- Profits are shared between more members
- It takes time to transfer shared to new orders
-Private limited companies cannot raise large amounts of moeny like public limited companies
8
Q
Advantages of franchises to the franchisee:
A
- Franchises are lower risk, as they use an idea that has already been tried and tested
- Franchisees get support from the franchisor
- The set-up costs of a franchise are predictable
- Franchisees can benefit from national marketing campaigns organised by the franchisor
9
Q
Disadvantages of franchises to the franchisee:
A
- A franchisee’s profit is shared with the franchisor
- Franchisees have to sign contracts with franchisors, which can reduce independence
- Setting up a franchise can be an expensive way to start a business
- Franchisses lack of independence and must follow strict operating rules
10
Q
Advantages of franchises to the franchisor:
A
- Franchising is a fast method of growth
- Franchising is a cheaper method of growth because growth is mainly funded by the franchisee
- Franchisees take some of the risk on behalf of the franchisor
- Franchisees are more motivated than employees
11
Q
Disadvantages of franchises to the franchisor:
A
- Potential profit is shared with franchisees
- Poor franchisees may damage the brand’s reputation
- Franchisees may get their supplies from elsewhere
- The cost of supporting franchises may be high
12
Q
Social enterprises forms:
A
- Co-operatives
- Worker co-operatives
- Mutual organisations
- Charities
13
Q
Articles of association
A
A document that provides details of the internal running of a limited company
14
Q
Certificate of incorporation
A
A document that declares a business is allowerd to trade as a limited company
15
Q
Co-operatives
A
Business organisations owned by their members who have equal voting rights
