Business Start Up

Question 0

What is a service?

Answer 0

~ A service is a non physical product that can be bought e.g driving lessons, a taxi ride or going to the dentist

Question 1

What is a good?

Answer 1

~ A good is a physical product that has money value and can therefore be bought and sold
~ Goods can be classified as Consumer goods, Producer goods and Capital goods

Question 2

What is the public sector?

Answer 2

~ The public sector refers to anything that is owned and controlled by the government, either locally or nationally

Question 3

What is the private sector?

Answer 3

~ The private sector is the part of the economy that is made up of business organisations that are owned by private individuals and not by the government e.g. Solicitors, hairdressers or even the corner shop

Question 4

What is an entrepreneur?

Answer 4

~ An entrepreneur is a person who has an idea for a new business and is prepared to take risks to make that business work

Question 5

What is it meant to be enterprising?

Answer 5

~ To be enterprising means to be able to spot a good business opportunity and have the vision and drive to make that business succeed. In order to do this that entrepreneur has to be prepared to take calculated risks

Question 6

What are characteristics of an entrepreneur?

Answer 6

~ An entrepreneur has original ideas
~ Has self confidence and passion about his/her venture
~ Has the ability to work independently
~ Is committed and willing to make personal sacrifices for the benefit of their businesses
~ Is a creative thinker and shows initiative
~ Is willing to take calculated business risks

Question 7

Why does the government encourage enterprise?

Answer 7

~ The government is keen to encourage enterprise and to develop an ‘enterprise culture’ in this country

Question 8

Reasons the government encourages enterprise

Answer 8

~ It reduces unemployment
~ People feel motivated
~ New ideas may succeed and provide fresh opportunities
~ Competitions ensures a healthier business environment

Question 9

What are the resources/ factors of production of a business?

Answer 9

~ Land - to build shops and factories and provide natural resources such as oils and crops
~ Labour - people involved in production, producing the goods or providing the service
~ Capital - to finance the business, machinery and buildings
~ Enterprise - bringing together the factors of production and taking risks with ideas (people who do this are called entrepreneurs)

Question 10

What is the private sector?

Answer 10

~ The private sector includes all those businesses that are set up and run by individuals or groups of individuals

Question 11

What is the public sector?

Answer 11

~ The public sector includes all those businesses that are owned and run by the government

Question 12

What are the four main types of businesses organisation in the private sector?

Answer 12

~ Sole trader
~ Partnership
~ Private Limited Company (Ltd)
~ Public Limited Company (Plc)

Question 13

What is a sole trader?

Answer 13

~ A sole trader is one person managing his or her business by themselves
~ The person can employ as many workers as he or she wants but does not share the finance, control, decision making or profits with anyone else
~ This form of legal organisation has unlimited liability ( this means that there is no limit to the business debt for which the owner is responsible)

Question 14

What are the advantages of a sole trader?

Answer 14

~ Profits are not shared, the owner has complete control and can run the business how they want
~ This form of organisation is simple to set up
~ There is no requirement to make information about the business public
~ The owner can introduce new and varied trading activities in the business without having to discuss it with anyone

Question 15

What are the disadvantages of a sole trader?

Answer 15

~ The owner must make all the decisions, there are no partners with whom they could share their decisions with
~ The owner is personally liable for any debts which the business cannot pay (unlimited liability)
~ This form of business has a low status in the business community
~ The business dies with the owner

Question 16

What is a partnership?

Answer 16

~ A partnership is a way of sharing with others the responsibility for a business
~ Legally a partnership must consist of between 2 -20 partners
~ Partnerships have unlimited liability
~ However limited or sleeping partners take now active part in the running of the business and have limited liability ( a sleeping partner is someone who invests money into the business but has no say in the day - to - day running and they get a share if the profit)

Question 17

What is the deed of partnership?

Answer 17

~ The deed of partnership is a legal document setting out the terms and conditions under which that particular business would operate

Question 19

In the 1990 partnership act what does the deed of partnership cover?

Answer 19

~ How profits and losses are shared
~ Who withdraws money
~ Holiday arrangements
~ Length of partnership 
~ Dissolving partnerships

Question 20

What are the advantages of a partnership?

Answer 20

~ Responsibilities and decisions making are shared
~ Continuity and support is possible, several partners mean that the business does not come to a stop if one person is ill or takes a holiday
~ Partners may have expertise in different aspects of the same area of business and this can be helpful in making the business become successful
~ More finance is available because all partners have to contribute

Question 21

What are the disadvantages of a partnership?

Answer 21

~ Profits are shared
~ Partners have unlimited liability
~ The size of the business is limited by the total number of partners allowed
~ A friend or partner does not necessarily make a good business partner
~ If your partner runs up in debt in the business you are equally responsible

Question 22

What is the private limited company?

Answer 22

~ A private limited company is often owned by people who know each other, such as family and friends
~ They buy shares in the company and become part owners of the company
~ A share is part of the capital
~ Shares cannot be sold to the public or transferred without permission from all the shareholders
~ This means that the owner can control who buys the shares and that is why it is called a private limited company
~ To set up a Ltd there must be at least one shareholder, one director and one secretary but there is no upper limit to the number of shareholders
~ A private limited company has Ltd or limited after its name to distinguish it from a public limited company
~ The shareholders have limited liability

Question 23

What is limited liability?

Answer 23

~ Limited liability means that if the company has financial problems the shareholders can be held responsible only up the value of their shares they do not run the risk of having to sell their personal possessions
~ This is because the company has its own legal entity, separate from the shareholders it also means that the company can sue and be sued

Question 24

Which two documents are needed when setting up a private limited company?

Answer 24

~ The Memorandum of Association

~ Articles of Associaiton

Question 25

What details does the Memorandum of Association give about a company?

Answer 25

~ Company name
~ Address and registered office
~ A statement of liability 
~ Amount of share capital to be raised
~ The purpose of the company