1.4.1 - The options for start-up and small businesses Flashcards Preview

GCSE Edexcel - Business definations and equations > 1.4.1 - The options for start-up and small businesses > Flashcards

Flashcards in 1.4.1 - The options for start-up and small businesses Deck (21)
Loading flashcards...
1

Limited Liability

- The company will lose no more than they invested in the business
- Meaning that personal assets will not be seized.

2

Unlimited liability

-The debts of the business are the owner's responsibility.
- Meaning personal assets will be seized in an event of bankruptcy to pay off the owner's debts.

3

List advantages of a sole trader

- Can set up a business easily
-Have autonomy(independence)
-Keep all profits made by the business
-Enjoy tax advantages, because of the small business

4

List disadvantages of a sole trader

- Owner bears all risks
- Limited specialisation
-Restricted ability to exploit economies of scale
- The lack of continuity. - eg the owner going sick, no one will be working.
- LIMITED LIABILITY

5

Sole trader

- A business owned by a single person.

6

Partnership

- Is a business organisation owned by more than one person. 2 and 20 owners.
- One person in the partnership will have unlimited liabili ty.

7

List advantages of a PARTNERSHIP

- Is able to raise more capital.
-More expertise.
-Busines affair of partnerships are kept confidential.
- Small business - Good communication within colleagues.
-More continuity than in a sole trader

8

List disadvantages of a PARTNERSHIP

- More people - More disagreements.
-Profits must be shared from the business.
-The partners have unlimited liability. However, sleeping partners have limited liability.

9

How do you set up a PRIVATE LIMITED COMPANY

You need:
- The Memorandum of Association.
- The Articles of Association
-Then a "Certificate of Incorporation" is issued to the company.

10

List advantages of limited companies

- Shareholders have limited liability
- Additional finance can be raised through selling shares.

11

List disadvantages of limited companies

- Companies have to file their financial accounts and have them checked by an accountant.
-They are harder to set up, are more time consuming and expensive to set up compared to sole proprietorships and partnerships.

12

List advantages of Franchisor

- Franchisee will be determined to succeed.
-The Franchisee has to pay to licence the product. Meaning that Franchisor can expand at a very fast rate.
- Franchisor does not have to involved in hiring store managers.

13

List advantages for the Franchisee

- Business model has already been tested, and there is already a demand for the product.
- Costs can be significantly lowers that starting a new business. - no market research
- You get given support by the Franchisor - such as sales promotion.

14

List Disadvantages to the franchisor

- The selection process is very long.
- Some Franchisees run their business quite poorly - a bad reputation.
- The reputation is no longer in the direct control of the franchisor

15

List Disadvantages to the Franchisee

- The franchisee has to purchase the right to the license of the business.
- You are not fully flexible. - Franchisor requires the business to be operated in a certain way.
- The business can not be sold without the prior agreement of the franchisor.

16

Assets:

Assets:

17

Incorporated:

A business that is registered as a company, so the business and the owner are separate in the eyes of the law

18

Unincorporated:

A business that is not registered as a company so the owners and the business are the same body in the eyes of the law

19

Deed of Partnership:

A legal document that defines the terms of the partnership

20

Private Limited Company:

An incorporated business that is owned by shareholders

21

Franchise:

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