Ch 5 - Establishing a small business Flashcards
What are types of small business?
- Trading business
- Service business
- Manufacturing business
What is a trading business?
they buy and sell inventory in order to earn sales revenue
What is a service business?
they provide particular services to their customers and receive a fee for their service
What is a manufacturing business?
they take raw materials and produce foods to be sold to others
What are the forms of business ownership?
- Sole proprietorship
- Company
- Partnership
What is a sole proprietorship?
A business owned by a single person
What are the advantages of a sole proprietorship?
- easy to set up, minimal legal requirements
- profits aren’t shared
- owner has complete control
What are the disadvantages of a sole proprietorship?
- starting capital is limited
- limited skills
- minimal holidays
- liabilities are unlimited
What is a partnership?
A business co-owned by several people
What are the advantages of a partnership?
- easy to set up
- skills can be combined
- decision making is shared
- losses are shared
What are the disadvantages of partnerships?
- profits are shared
- partners have unlimited liability
- limited capital and borrowing ability
What is a company?
A company a business that is a seperate legal entity from its owners
What are the advantages of a company?
- shareholders have limited liability
- specialised skills are available
- ownership is transferable
What are the disadvantages of a company?
- loss of personal input into the decision making
What are the two types of companies?
- private companies
- public companies
