(3) Sole traders, partnerships, social enterprises and franchises Flashcards
Who are entrepreneurs?
They are people who set up businesses.
What are the characteristics of entreprenuers?
They are: - Innovators
- Organisers
- Decision makers
- Risk takers
What is the difference between unincorporated and incorporated businesses?
In unincorporated businesses, there is no legal difference between the owner and the business. Whereas in an incorporated business, there IS a legal difference.
Who is a sole trader?
A sole trader is a business that is run by one owner.
What are the advantages of being a sole trader?
1) The owner keeps all profits.
2) They are independent.
3) No legal requirements.
4) May qualify for government help.
What are the disadvantages of a sole trader?
1) Has unlimited liability.
2) May struggle to raise finance.
3) Very hard work.
4) Usually too small to exploit economies of scale.
5) No continuity.
What is a partnership?
It is a business where there a between 2 and 20 owners. The owners share responsibility for owning the business and they also share the profits.
What is a deed of partnership?
It is a legal document that states the rights of the partners incase of a dispute.
What does the deed of partnership state?
- How much capital each partner will contribute
- How profits and losses will be shared among the partners.
- The procedure for ending a partnership
- Rules for taking on new partners
What are the advantages of partnerships?
1) No legal formalities.
2) The responsibilities are shared.
3) Financial info isn’t published.
4) Partners can specialize in their area of expertise.
What are the disadvantages of partnerships?
1) Unlimited liability.
2) Profits are shared.
3) They tend to be small.
4) Partners may disagree and fall out.
What is a franchise?
It is a structure in which a business allows another operator to trade under the franchisee’s name.
What does a franchisee offer a franchisor?
- A license to trade under their name
- Training
- Materials, equipment, and support services
- Marketing support
- An exclusive area to operate in
What are the fees that the franchisor has to pay?
- Start up fee
- An ongoing fee
- Contribution to marketing costs.
What is a social enterprise?
It is a business that aims to improve human and environmental well being, rather than make a profit.
