CHAPTER 3 - Business Ownership Flashcards
1
Q
SOLE TRADER
A
business owned by a single person
2
Q
Advantages of a sole trader
A
- the owner keeps all the profit
- they are independent ( owner has complete control )
- flexibility ( for example: can adapts to change quickly )
3
Q
Disadvantages of a sole trader
A
- have unlimited liability
- may struggle to raise finance - considered too risky by those that lend money
- independence = too much responsibility
- no continuity - the business dies with the owner
4
Q
PARTNERSHIP
A
business owned by between 2 and 20 people
5
Q
Advantages of partnerships
A
- easy to set up and run
- partners can specialise in their area of expertise
- job of running a business is shared
- more capital can be raised with more owners
- financial information is not published
6
Q
Disadvantages of partnerships
A
- partners have unlimited liability
- profit has to be shared
- partners may disagree and fall out
- partnerships still tend to be small
7
Q
FRANCHISE
A
structure in which a business ( the franchisor )allows another operator ( the franchisee ) to trade under their name
8
Q
Advantages to the FRANCHISEE
A
- less risk ( a tried and tested idea is used )
- back - up support is given
- set - up costs are predictable
- national marketing may be organised
9
Q
Disadvantages to the FRANCHISEE
A
- profit is shared with the franchisor
- strict contracts have to be signed
- lack of independence ( strict operating rules apply )
- can be an expensive way to start a business
10
Q
Advantages to the FRANCHISOR
A
- fast method of growth
- cheaper method of growth
- franchisees take some of the risk
- franchisees more motivated than employees
11
Q
Disadvantages to the FRANCHISOR
A
- potential profit is shared with franchisee
- poor franchisees may damage brand’s reputation
- franchisees may get merchandise from elsewhere
- cost of support for franchisees may be high
12
Q
SOCIAL ENTERPRISE
A
business that aims to improve human or environmental well - being, charities for example
