entrepreneurs and leaders

Question 1

what does ‘form of business’ refer to

Answer 1

the legal status of the organisation

Question 2

legal forms of business

Answer 2

• sole trader
• partnership
• private limited company
• public limited company

Question 3

other forms of business - not specifically relating to legal status

Answer 3

• franchising
• social enterprise
• lifestyle business
• online business

Question 4

liability meaning

Answer 4

refers to the extent to which the owners of the business must repay debts incurred in the running of the business

Question 5

sole trader ad/disadvantage

Answer 5

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

Question 6

partnership ad/disadvantage

Answer 6

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

Question 7

unlimited liability meaning

Answer 7

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.

Question 8

limited liability

Answer 8

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

Question 9

business with limited liability

Answer 9

limited companies tend to attract more investors

• private limited companies
• public limited companies

Question 10

private limited companies (LTD)

Answer 10

a private limited company has increased legal formalities including having accounts independently audited each year at a probable cost of several thousand pounds

Question 11

public limited companies (PLC)

Answer 11

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.

Question 12

what does a business must have to become a PLC vs the LTD

Answer 12

PLC: a minimum of £50,000 share capital
LTD: no minimum share capital

Question 13

a franchise

Answer 13

a licence to use another businesses name and business model in return for payment

Question 14

a franchisor

Answer 14

is a business that sells the right to use its name and logo to other businesses or entrepreneurs

Question 15

a franchisee

Answer 15

is an entrepreneur or company that buys a licence to use another businesses name and business model in return for payment

Question 16

franchising

Answer 16

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.

Question 17

benefits / drawbacks for a franchisee

Answer 17

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

Question 18

social enterprise

Answer 18

place the desire to fix a social problem above the profit motive when making decisions

Question 19

lifestyle business

Answer 19

entrepreneurs that set up a business to suit their desired lifestyle. E.g maximum profit, flexible working

Question 20

online businesses + advantages

Answer 20

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)

Question 21

characteristics to a successful entrepreneur

Answer 21

• understanding the market
• determination
• passion
• resilience
• the ability to cope with risk

Question 22

what is taking sensible risks

Answer 22

weighing up the risks and rewards that a course of action offers

Question 23

what are the common skills that good entrepreneurs will need to demonstrate

Answer 23

• 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.

Question 24

reasons for setting up a business

Answer 24

• profit maximising
• profit satisficing
• independence
• home working
• ethical stance
• social entrepreneurship

Question 25

profit maximising

Answer 25

continually seeking to get the most profit from every business transaction

Question 26

profit satisficing

Answer 26

means blending a desire for profit with other factors like building a good rep or having good work-life balance

Question 27

independence

Answer 27

avoiding the need to take orders from others or fit in with company policy

Question 28

home-working

Answer 28

working from home, more for those who value family commitments

Question 29

ethical stance

Answer 29

for those with strong beliefs, they are unwilling to compromise their beliefs by working in a business with whose practices they feel uncomfortable

Question 30

social enterprise

Answer 30

their main aim is to make a positive contribution to their community, like providing a service