Topic 22 Flashcards
Features of sole traders
. Common in tertiary sector
. Unlimited liability
. Simple to set up
. Full control
. All profits go to owner
. Difficult to raise finance
Advantages of sole traders
-> easy to establish with few legal requirements
-> owner has full control over business
-> profits don’t need to be shared
-> owner can provide personal service
Disadvantages of sole traders
-> unlimited liability
-> long working hours
-> harder to raise finance compared to larger businesses
-> no continuity if owner dies or retires
Features of partnerships
- Governed by Partnership Act 1890
- Partners share profits and decision making
- Some partners may contribute capital
- Deed of partnership-> outlines roles, profit sharing
Advantages of partnership
-> more capital available
-> partners can specialise in different areas
-> workload and risks are shared
-> easier to raise finance than sole traders
Disadvantages of partnership
-> partners may disagree on decisions
-> unlimited liability
- > profits shared among parties
-> no continuity if partner leaves or dies
Features of private limited companies (Ltd)
- Shareholders have limited liability
- Shares can be sold privately
- Must have a Memorandum of Association & Articles of Association
- Often family business
- Owners must register business and follow company law
Advantages of private limited companies
-> limited liability
-> easier to raise capital
-> owner & tax advantages + higher status than sole traders and partnerships
-> business continuity if owner leaves
Disadvantages of private limited companies
-> Legal and administrative costs to set up.
-> Financial information is made public.
-> Profits must be shared among shareholders.
-> Shares cannot be sold freely to the public.
Features of franchising
- The franchisee pays an initial fee and ongoing royalties
- The franchisor provides training, marketing support, and a recognized brand.
- Common in fast food, retail and fitness
Advantages of franchises
-> Reduced risk
-> Support from the franchisor – Training, advertising, etc.
-> Easier to secure finance from banks.
-> National marketing campaigns increase brand awareness.
Disadvantages of franchises
-> High start-up costs and ongoing fees.
-> Strict operational rules – Limited creativity.
-> Dependent on the franchisor’s reputation.
Types of social enterprises
- Co-operatives
- Worker co-operatives
- Mutual organisations
- Charities
Advantages of social enterprises
-> Positive social impact
-> Can access grants and funding
-> Build strong community trust and reputation
Disadvantages of social enterprises
-> May struggle to generate enough profit
-> Heavily reliant on donations or government support
-> Managing social and financial objectives can be complex
Features of lifestyle business
- Often home-based + flexible hours
- Involves freelancing, consulting or online retailing
- Income enough to support lifestyle
- Growth not primary goal
Features of online businesses
- Operates 24/7
- Lower start-up + operational costs
- Can reach large customer base
Advantages of online businesses
-> lower costs
-> convenience
-> ability to scale and expand globally
Disadvantages of online businesses
-> increased competition
-> dependence on technology
-> lack of personal customer interaction
