LO5

Question 1

What is a sole trader?

Answer 1

A business owned and controlled by one person.

Question 2

What are 2 benefits to being a sole trader?

Answer 2

• Easy to set up.
• Low set-up costs.
• Owner makes all the choices reducing time taken to make choices.
• Can chose their own working hours.
• Limited legal requirements.

Question 3

Name 2 disadvantages to being a sole trader?

Answer 3

• Difficult for the business to grow very large.
• Banks are less keen to to lend sole traders money.
• A sole trader has unlimited liability, which means they are responsible for all debuts of the business.
• Could have to work long hours.

Question 4

What is a partnership?

Answer 4

A partnership is a business that is owned or controlled by two or more people.

Question 5

What are 2 benefits of being a partnership?

Answer 5

• Greater capital investment available from the different partners.
• Partners bring different skills and attributes to the business.
• Responsibly shared among partners.
• Increased public image compared to sole traders.

Question 6

Name 2 disadvantages of being a partnership?

Answer 6

• Choice making can be time consuming.
• Potential for disagreement.
• Unlimited liability unless you are a limited liability partnership.

Question 7

What is a Franchise?

Answer 7

A franchisor grants a license for the franchise so that they cal sell their business to franchisee.

Question 8

What are 2 benefits of being in a franchise?

Answer 8

• Already have an established brand name.
• Easier to raise finance as the franchise will be well known.
• Limited business and industry experience.
• Still own the business but not the idea.

Question 9

Name 2 disadvantages of being in a franchise?

Answer 9

• The initial and on-going costs of operating a franchise are not cheap.
• The franchise will need to Sitka to the marketing activity agreed by the franchisor.
• May be difficult to break into a new area.

Question 10

What does a Private’s limited company have to submit? a PLC.

Answer 10

• Memorandum of association.

- Articles of association.

Question 11

Who has to register with the HMRC?

Answer 11

• Soletrader.
• Partnership
• Limited Liability partnership.

Question 12

List 3 start up finance:

Answer 12

• Friends and family.
• Loans.
• Crow-funding.
• Own savings.
• Small business grants,
• Business angels.

Question 13

What is an advantage and disadvantage of using your own savings?

Answer 13

• Limited money available. (dis)
• No loans.(ad)
• No money incase of accident(dis)
• Car belongs to you.(ad)

Question 14

What is an advantage and disadvantage of getting money from friends and family?

Answer 14

• No fees. (ad)
• Limit to money available. (dis)
• Could start arguments within the family. (dis)

Question 15

What is an advantage and disadvantage of getting money from family and friends?

Answer 15

• longer term source of finance. (ad)
• Evidence to see that the business can re-pay. (dis)
• Charge interest (dis)