unit 2 : setting up a new enterprise Flashcards
sole trader
what is a sole trader
- sole traders are people who run what is usually a realatively small business by themselves
- advantages
- any profit after tax is kept by owner
- flexibility in working hours
disadvantages
- unlimited liability
- owner may lack skills or experience
partnership
what is a partnership
-a type of business organisation owned by 2 or more people (often 20 as max)
advantages
- having more than one owner makes it easier to raise money
- partners can share in decision making and can specialise in aspects of the work
disadvantages
- may not be large enough to gain economic of scale
- any decision made by one partner is legally binding on all partners
- profits have to be shared
limited company
what is a limited company
- a limited company is a business where the shareholders (Owners) have separate legal identity from the firm itself
2 types of limited companies
- private limited compnay ( shares cannot be bought by members of public)
- public limited company (stock exchange)
advantages
- shareholders have liability (cannot loose personal belongings)
- a limited company will continue if owner dies
disadvantages
- the original founders may lose control as people buy shares
- a minimum amount of capital is needed to establish a limited company
franchise
what is it
- an franchise arrangement allows an enterprise to purchase the right to sell a particular product
advantages
- they sell a well known branded prodcut which reduces the risk of failiure
- the franchisor funds some advertising which saves money
disadvantages
- the franchisee has to pay the frenchisor a free for rights
- the franchisor may strictly control the activites of the franchisee
co-operative
what is a co-operative business
- a business that is owned and run by its members
advantages
- there is usually democratic ownership with one member one vote
- co-operative are usually more ethical than other business
disadvantages
- shares are not usually sold on stock exchange
- in a producer co operative the worker can lack the necessary experience
social enterprise
social enterprises make their money from selling goods and services in a market, like any other enterprise but they reinvest their profits into the local community in some way (eg charity)
what is a stakeholder
various groups with a strong interest in a particular enterprise including customers, employees, suppliers and the community
groups who shape the objectives/goals of a business
customers and clients: expecting quality products at good prices
supplier of components: an enterprise needs good relations with suppliers
members and employees - need appropiate pay and good working conditions
what is profit maximization
the goal of many enteprrises to make the gap between total revenue and total cost as wide as possible
what is satificing
where an enterprise aims for an adequate level of profit rather than profit maximisation
rewards
an entrepreneur will hope to make money as a result of the activites of an enterprise: profit mximization is the main goal of many enterprises
challenges
a large proportion of enterprises fail especially in the first year
a gap in the market may be identified but gaining and retaining enough customers may be a challenge
the enterprise must employ the right people to acheive its objectives
what is social responsibility
the enteprise may have wider goals relating to the community and the enviroment
