entrepreneurs and leaders Flashcards
what does ‘form of business’ refer to
the legal status of the organisation
legal forms of business
- sole trader
- partnership
- private limited company
- public limited company
other forms of business - not specifically relating to legal status
- franchising
- social enterprise
- lifestyle business
- online business
liability meaning
refers to the extent to which the owners of the business must repay debts incurred in the running of the business
sole trader ad/disadvantage
a sole trader is a person who starts and runs a business without turning it into a company
AD: owner has full control / owner keeps all profits
DIS: owner has unlimited liability for debts / hard to raise finance
partnership ad/disadvantage
where several sole traders come together to set up a business
AD: shared skills and experience / more finance to be raised / shared burden of responsibility
DIS: partners have unlimited liability / potential for disagreements among partners
unlimited liability meaning
means that owners of the business must take personal responsibility for covering debts run up by their business. If the business goes bust, owners can be forced to sell personal assets to repay whom money is owed.
limited liability
a form of legal protection for business owners which ensures that owners of a limited company can only lose the money they have invested in the business
business with limited liability
limited companies tend to attract more investors
- private limited companies
- public limited companies
private limited companies (LTD)
a private limited company has increased legal formalities including having accounts independently audited each year at a probable cost of several thousand pounds
public limited companies (PLC)
this is the only type of business that can sell shares via the stock market to the general public. this allows them to raise vast sums of share capital.
what does a business must have to become a PLC vs the LTD
PLC: a minimum of £50,000 share capital
LTD: no minimum share capital
a franchise
a licence to use another businesses name and business model in return for payment
a franchisor
is a business that sells the right to use its name and logo to other businesses or entrepreneurs
a franchisee
is an entrepreneur or company that buys a licence to use another businesses name and business model in return for payment
franchising
this offers the opportunity to start a business using a tried and tested formula, as well as franchisors being able to expanding their businesses rapidly for a relatively cheap price.
benefits / drawbacks for a franchisee
BENEFITS: access to a tried and tested formula for business success / support from franchisor / advice and training on all business functions / possibility of a national advertising campaign from the franchisor / easier access to loans as banks recognise as lower risk
DRAWBACKS: franchisee may feel frustrated at being unable to make decisions dictated by franchisor / there is likely to be initial franchisee fee to buy licence / franchisor will expect percentage of revenue
social enterprise
place the desire to fix a social problem above the profit motive when making decisions
lifestyle business
entrepreneurs that set up a business to suit their desired lifestyle. E.g maximum profit, flexible working
online businesses + advantages
businesses that can connect with consumers and never even need to meet face to face.
AD: lower costs (no physical premises)
higher potential revenues (with scope to sell worldwide)
characteristics to a successful entrepreneur
- understanding the market
- determination
- passion
- resilience
- the ability to cope with risk
what is taking sensible risks
weighing up the risks and rewards that a course of action offers
what are the common skills that good entrepreneurs will need to demonstrate
- financial skills: understanding financial documents, how finance allows businesses to function
- persuasive abilities: in order to get ppl to do things - staff customers or suppliers
- problem-solvers: identify cause of the problem and solve it
- networking skills: range of business contacts, people who can help out when needed.
reasons for setting up a business
- profit maximising
- profit satisficing
- independence
- home working
- ethical stance
- social entrepreneurship
profit maximising
continually seeking to get the most profit from every business transaction
profit satisficing
means blending a desire for profit with other factors like building a good rep or having good work-life balance
independence
avoiding the need to take orders from others or fit in with company policy
home-working
working from home, more for those who value family commitments
ethical stance
for those with strong beliefs, they are unwilling to compromise their beliefs by working in a business with whose practices they feel uncomfortable
social enterprise
their main aim is to make a positive contribution to their community, like providing a service
