LO5 - Understand factors for consideration when starting up a business

Question 1

If a business owner has unlimited liability, what does this mean?

Answer 1

This means the business owner is personally liable/responsible for all business debts.

Question 2

What is a sole trader?

Answer 2

A business that is owned and controlled by one person, although they may employ other workers.

Question 3

What is a partnership?

Answer 3

A business owned by 2 or more people

Question 4

What is the liability status of a limited liability partners

Answer 4

A limited liability partnership has limited liability.

Question 5

What is the liability status of a general partnership?

Answer 5

A general partnership has unlimited liability.

Question 6

Sharon wants to set up as sole trader selling her hand knitted jumpers. What are some benefits of setting up as a sole trader?

Answer 6

Easy to set up;Small start-up costs;You keep all the profits;You answer to noone but yourself;Freedom to make all decisions;Full control of the business;Flexibility;You can change the ownership status as the business expands.

Question 7

If Sharon sets up as a sole trader, she would like to know w

Answer 7

Unlimited liability;Long hours mean you rarely get a break;Unattractive to customers;Difficult to secure business finance as it is seen as very risky form of ownership;Responsibility for all decisions can cause the owner pressure.

Question 8

Owners of a limited company are known as:

Answer 8

Shareholders

Question 9

Which government agency must a limited company register with?

Answer 9

HMRC

Question 10

What does a limited liability status mean for a business?

Answer 10

It means that the business and its owners are treated as separate legal entities, so their finances are kept separate.

Question 11

If a business has an unlimited liability status, what does this mean?

Answer 11

The owner(s) of the business are 100% responsible for the debts of the business.

Question 12

Sharon has heard that franchises have a higher rate of success. What are the disadvantages of a franchise?

Answer 12

You will be entering a formal agreement with your franchisor;The franchise agreement dictates how you run the business so can stifle creativity;The franchise agreement can place restrictions on where you operate, the products you sell and suppliers you use;You share the profits with the franchisor.

Question 13

Jack and Jill share responsibility for the running of their business. What status business is this?

Answer 13

Partnership