Topic 1.4 - Making the business effective Flashcards
unlimited liability
if the debts of the business cannot be paid by the business the owner’s personal assets are at risk. The business are known as unincorporated business
(owner and the business are same in the eye of the law)
limited liability
if the debts of the business cannot be paid by the business by the owner’s personal assets are not at risk. These businesses are known as incorporated
(owners and business are different in the eyes of the law)
private limited company
company owned by shareholders
franchise
where one business that gives another business permission to trade using its name and products in return for a fee
franchisor
an established business that gives permissions to an entrepreneur who pays a fee to trade using the name and product
franchisee
an entrepreneur who pays a fee to trade using the name and product of an establishment business
advantages/disadvantages of sole traders
advantages
-quick decision making
- quick and easy to set up
- sole trader keeps all the profits
disadvantages
- unlimited liability
- difficult to raise capital
- lots of pressure on one person
- difficult to run if owner is ill or takes time of
advantages and disadvantages of partnership
advantages -
- more ideas and expertise available
- risk is shared
- easier to raise finance
- financial information kept private
disadvantages -
- profits are shared
- there maybe disagreements between partners which can slow down decision making
- if a partner leaves, the between may no longer exist
advantages and disadvantages of private limited companies
advantages
- limited liability
- can be easier to raise finance by selling shares
- the business can continue to trade even if shareholders change
- the ‘Ltd’ after a business name can make it appear to be a bigger more established business
disadvantages
-more complex to set up sole traders and partnerships
- there maybe disagreements between shareholders
- financial information is published
advantages and disadvantages of franchise
advantages
- support and training provided by franchisor
- lower risks as already a successful business model
- more requirements to report information to HMRC and Companies House
disadvantage
- high initial fees and having to pay royalty payments
- franchisees cannot make independent decisions
- franchisees cannot make independent decisions
- brand reputation may be damaged by other franchisees if they do not maintain standards
3 benefits of e-commerce
- lower operating costs
- ability to reach wider audience
- ability to trade 24/7
main purposes of a business plan
minimizing risk
obtaining finance
