Chapter 14 Getting Started Flashcards
Why do entrepreneurs start a business?
Independence: Many entrepreneurs enjoy being their own boss and having the freedom to make their own decisions
Challenge: some constantly feel the need to challenge themselves and strive to achieve their full potential
Creativity: having developed an innovative concept or business idea some realise that starting their own business represents the best avenue for achieving their vision
What 4 ownership structures are available to startup businesses
Sole trader
Partnership
Private limited company
Co-operative
What is a sole trader?
A business which is owned by one person it most common examples include butchers, barbers ect
Advantages of a sole trader
- It is easy to set up with very few legal formalities
- The owner has complete control of the business and makes all the major decisions
- The owner keeps all the profits
Disadvantages of a sole trader
Lack of capital- since only one person is financing the business there is a limit to the amount of capital available
Lack of business expertise- if the sole trader is new to a business they wouldn’t have all the skills required
Unlimited liability- the liability is not just limited to the amount of capital invested in the business. The sole trader may have to forfeit personal assets in order to pay debts
What is a partnership
A business partnership allows for between two and twenty owners thereby providing greater access to capital and skills needed by a business.
Partners are usually advised to sign a legal agreement called a deed of partnership
What is the deed of partnership and what issues does it set out
A legal agreement partners are advised to sign when entering a partnership
- amount of capital each partner will provide
- how many votes each partner has
- rules for admitting new partners
- how the partnership will be brought to an end
Key issues for a business start up
Ownership structure Business location Sources of finance Production methods Marketing mix
Partnership advantages
More capital - each partner may bring money and financial resources to the business
Extra skills and shared workload
Less risk- the risk is spread across more people
Partnership disadvantages
Profits shared
Less control
Disputes- disagreements may arise over workload or areas of shared responsibility
What is a private limited company
It allows up to 149 shareholders to establish a business
Shareholders receive a share of annual profits in the form of dividends
Must be registered with companies registration office
Key features of a limited company
Separate legal entity
Continuity of existence
Limited liability
Key issues for a business start up
Ownership structure Business location Sources of finance Production methods Marketing mix
Partnership advantages
More capital - each partner may bring money and financial resources to the business
Extra skills and shared workload
Less risk- the risk is spread across more people
Partnership disadvantages
Profits shared
Less control
Disputes- disagreements may arise over workload or areas of shared responsibility
What is a private limited company
It allows up to 149 shareholders to establish a business
Shareholders receive a share of annual profits in the form of dividends
Must be registered with companies registration office
Key features of a limited company
Separate legal entity
Continuity of existence
Limited liability
Continuity of existence feature in private limited company
The company continues to trade irrespective of director or management changes until it’s closed down
Limited liability
If the company fails the personal assets are not affected. The shareholders only liability is for the value of the shares
Limited company advantages
Limited liability
Separate legal identity
Continuity
Taxation
Limited company disadvantages
Set up procedures and costs a very clear procedure needs to be followed and the costs is greater than most other ownership structures
Profits shared. Annual profits are divided amongst all of the shareholders.
Disclosure-all companies are required to make annual submissions to the CRO
What is a co-operative business
A group of people working together to achieve a shared goal. Usually owned by shareholders who have a common bond
Avo more originated from a producer co-op
Name the different types of co-ops in Ireland
Producer co-ops- they engage in production and processing of crops and farm produce
Community- usually set up to fund some important service for members of the local community.
Financial co-ops credit unions are examples
