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Business-Theme 1 > Topic 1.4.1 - Options for start-up > Flashcards

Topic 1.4.1 - Options for start-up Flashcards

1
Q

What are the two types of small private business ownerships?

A
  • Sole Trader/Proprietor

- Partnership

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2
Q

What is a sole trader/proprietor?

A

A “one person” business. Only one person has ownership of the business.

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3
Q

What is a partnership?

A

It is between 2-20 people sharing ownership of a business with the aim of making a profit

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4
Q

Which type of ownership is the most common?

A

Sole trader - In Britain 63% of businesses

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5
Q

Do all sole traders work by themselves?

A

No - some will need to employ people

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6
Q

Examples of sole traders?

A
  • Plumbers
  • Florists
  • Hairdressers
  • Newsagents
  • Electricians
  • Photographers
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7
Q

Do sole traders have limited or unlimited liability?

A

Unlimited liability

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8
Q

What is unlimited liability?

A

If a business fails:

  • The owners would have to sell their personal assets to pay off the debt by the business
  • The owner is legally responsible for any problems
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9
Q

What are some types of debts that are incurred in a business?

A
  • Capital borrowed from the bank
  • Money owed to suppliers
  • Employee wages
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10
Q

What happed to sole traders if a debt in not repaid?

A

Sole trader can be taken to court and made bankrupt

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11
Q

Which type of business is at a greater risk when they put their own money into a business

A

Small-business owners

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12
Q

What happens when the business is successful for a sole trader?

A

The owner gets all of the profits

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13
Q

What is a required to do for a sole trader?

A
  • Register as self-employees with the Inland Revenue

- Complete annual self-assessment tax forms

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14
Q

What are two things that are helpful for a sole trader but are not legally obliged?

A
  • A business plan

- On -going accounts

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15
Q

What are some of the qualities of a limited company?

A
  • Shares
  • Team work
  • More help
  • Trust
  • Security
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16
Q

What does it mean by a limited company having shares?

A

More people are responsible for the business

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17
Q

What does it mean by a limited company having team work?

A

More people care if your business succeeds

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18
Q

What does it mean by a limited company having more help?

A

The government are better equipped to help your business

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19
Q

What does it mean by a limited company having trust?

A

Studies show that customers find limited companies more trustworthy

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20
Q

What does it mean by a limited company having security?

A

The banks are keen to prevent a limited company from falling

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21
Q

What are some qualities of a sole trader?

A
  • Liability
  • Simplicity
  • No staff
  • Less rules
  • Risks
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22
Q

What does it mean by a sole trader having liability?

A

The individual is the business

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23
Q

What does it mean by a sole trader having simplicity?

A

The individual is in complete control

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24
Q

What does it mean by a sole trader having no staff?

A

The individual keeps all of the profits

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25
Q

What does it mean by a sole trader having less rules?

A

The individual has less legislation to deal with

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26
Q

What does it mean by a sole trader having risks?

A

This individual has less of a safety net

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27
Q

What is shared among partners in a partnership?

A
  • The control
  • Running the business
  • Profits
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28
Q

What are some types of partnerships?

A
  • Dentists
  • Solicitors
  • Estate agents
  • Building firms
  • Accountants
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29
Q

What is the Partnership Act of 1890?

A

Partners are equally responsible for each other’s actions and all the debts of the business

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30
Q

Which type of liability does a partnership have?

A

Unlimited liability

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31
Q

What happens when one partner runs up a big debt?

A

The other partners can be asked to pay it off

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32
Q

What is a Deed of Partnership?

A

Partnership businesses set up this agreement to protect themselves from big debts to repay

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33
Q

What matter does a Deed of Partnership set out?

A
  • Amount of capital contributed by each partner
  • How much say each partner has in decisions
  • How profits are shared
  • What’s to be done if partner leaves or enters
  • How to settle disputes
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34
Q

What are sleeping partners?

A

Partners who put money into the partnership, but DON’T play an active role in running the business

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35
Q

Is it essential to have a Deed of Partnership?

A

No - but it can help the business run smoothly by setting out how disputes an be settled

36
Q

What are some advantages of a partnership over a sole trader?

A
  • Finance is easier to control
  • More skills/expertise
  • Sickness and holiday time can be covered
  • Simple to set up
37
Q

What are some disadvantages of partnerships?

A
  • All profits have to be shared (TIP: think selfish)
  • All partners are liable for any debts
  • Owners share control = disagreements/problems
  • Poor decisions = affects other partners
38
Q

What are limited companies?

A
  • Owned by shareholders
  • Run by directors
  • Set up as a separate body from owners
38
Q

What is a shareholder?

A

People who invest money in shares of the company

39
Q

What are directors?

A

People appointed by shareholders to control and make strategic decision for that company

40
Q

Does a limited company have limited or unlimited liability?

A

Limited

41
Q

What is limited liability/

A

You can’t lose any more money you invested in your business

42
Q

Does setting up a limited company have a high or low risk?

A

Low risk

43
Q

When setting up a limited company, what is required?

A

Register with the Registrar of Companies at Companies House

44
Q

What does the Companies House issue you after registering?

A

A Certificate of Incorporation

45
Q

What is a Certificate of Incorporation?

A

Official document which shows that the business have come into existance

46
Q

What must a limited company produce?

A
  • Memorandum of Association

- Articles of Association

47
Q

What is a Memorandum of Association?

A

Stares who they are, where they are based and what they do

48
Q

What is an Articles of Association?

A

An internal ‘rulebook’ which sets out how the business will be run

49
Q

What does Ltd stand for?

A

Private limited company

50
Q

What does PLC stand for?

A

Public limited company

51
Q

What is the difference between private limited companies and public limited companies/

A

The ownership of their shares

52
Q

What happens to shares in a private limited company?

A
  • Restricted ownership

- Shares in the company can only be sold if all shareholders agree

53
Q

What happens to shares in public limited companies?

A
  • Sold on the London Stock Exchange

- Can be bought by members of the general public

54
Q

How much money does a private limited company need to start up?

A

As little as £2 in sure capital

55
Q

How much money does a public limited company need to start up?

A

At least £50,000 worth of shares

56
Q

Which is tends to be smaller: Ltd or PLC?

A

Ltd (Private Limited Company)

57
Q

What are some examples of private limited companies?

A
  • Recruitment
  • Consultants
  • Building firms
  • Estate agents
  • Caterers
  • Family-run businesses
58
Q

How do private limited companies become public limited companies?

A

Floating their shares on their stock market to be bought and sold by the public = raises capital for expansion

59
Q

Why are public limited companies more vulnerable?

A

Shares can be bought by anyone so they are vulnerable to takeovers. Director must have over 50% of the company to stay in charge.

60
Q

Why do public limited companies grow at a faster rate than private limited company?

A

There are a greater number of shareholders

61
Q

Do shareholders in a public limited company have more influence over the company than a private limited company and why?

A

No - there are more shareholders in total

62
Q

What meeting should all public limited companies hold?

A

Annual General Meetings - shareholders are given the opportunity to ask questions to the board of directors and take votes on company decisions

63
Q

What are the two main types of co-operative business ownerships?

A
  • Consumer co-operatives: owned by customers

- Workers’ co-operative - owned and run by their workers

64
Q

What are co-operative businesses?

A
  • They have important objectives other than making profit.
  • Aim to support the wider community
  • Encourage ethical business practices
65
Q

What are the two types of business sectors?

A
  • Private sector

- Public sector

66
Q

What are examples of private sectors?

A
  • Sole traders
  • Partnerships
  • Limited companies
    (All owned by private individuals or companies)
67
Q

What are examples of the public sector?

A

Tend to be service providers:

  • Local sports centres
  • Libraries
  • Job centres
  • State schools
68
Q

Who runs and owns the public sector?

A

Central government or local authorities

69
Q

What is a similarity between public sector organisations and private businesses?

A

The way they operate on a day-to-day basis

E.g. run by managers who make decisions on behalf of organisation

70
Q

Difference between public sector organisations and private sector businesses.

A
  • Don’t usually operate to generate profit

- Funded from taxes such council tax rather than shareholders

71
Q

The government does own and operate some profit-seeking organisations such as…

A

BBC and Royal Mail

72
Q

Why were these public corporations set up?

A

To provide with public with a service. Any profit goes back into organisation or government to fund things (schools and NHS)

73
Q

What are some companies that have been privatised?

A

British Telecom (BT), British Gas and British Gas

  • Used to be government owned but sold/privatised
  • Public sector -> Private sector
74
Q

Advantages of a sole trader

A
  • Makes own decisions
  • Quick and easy to set up
  • Keep all profits
  • Financial info is private
75
Q

Disadvantages of a sole trader

A
  • Unlimited liability
  • Difficult to raise money to establish/grow business
  • One person = PRESSURE
  • Difficult if owner is ill of takes time off
76
Q

Advantages of a partnership

A
  • Wider expertise/share ideas + decision making
  • Shared risk
  • Easier to raise finance
  • Financial info is private
77
Q

Disadvantages of a partnership

A
  • Decision by one partner affects all partners
  • If partner leaves = no business
  • Shared profits
  • Disagreements between partners
78
Q

Advantages of a private limited company

A
  • Limited liability
  • Ltd = more established
  • Easy to raise finance
  • Business still runs if shareholders change
79
Q

Disadvantages of private limited companies

A
  • Complex to set up
  • Disagreements between shareholders
  • Financial info is published
  • Required to report info to HMRC + Companies House
80
Q

What is a franchise?

A

One business gives another business permission to trade using its name and its products in return for a fee and a share of its profits

81
Q

What is a franchisor?

A

Established business that allows an entrepreneur to trade using its name and products

82
Q

What is a franchisee?

A

An entrepreneur who pays a fee to trade using the name and products of an established business

83
Q

Examples of franchises

A

KFC, McDonalds

84
Q

Advantages of franchising

A
  • Lower risk that setting up independently (business model = successful)
  • Support/training provided by franchisor
  • Franchisees benefit from national marketing campaigns
85
Q

Disadvantages of franchising

A
  • Franchisees have to pay initial fee + ongoing fees + share of profits
  • Franchisees can’t make decisions
  • Brand reputation can be damaged by other franchisees if standards aren’t maintained

Business-Theme 1 (6 decks)

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