1.5.4- Forms of Business

Question 1

sole trader

Answer 1

• owned by one person (proprietor)
• unlimited liability
• can employ people however they won’t be involved with the running of the business

adv-

• quick decisions
• all profits are kept
• national insurance contributions are lower

dis-

• unlimited liability
• difficult to raise money
• no Eos

Question 2

partnership

Answer 2

• 2 to 20 members
• unlimited liability
• profits are shared

adv-

• profits go to partners meaning they are more motivated
• share problems and decisions
• easy to raise extra capital

dis-

• unlimited liability
• if partner dies or becomes bankrupt the partnership is dissolved

Question 3

private limited company

Answer 3

• made up of friends and family
• min 2 people
• limited liability

adv-

• limited liability
• can raise extra capital
• has its own legal status

dis-

• difficult to set up
• cannot sell stocks

Question 4

franchise

Answer 4

where a small business owner buys the rights to sell the goods and services of a large, well established company

adv-

• franchisor decides how much money to invest
• franchisor provides support, management advice and training

dis-

• franchisee can’t sell the business without permission
• pays percentage of profits in royalties
• will never own the business outright

Question 5

social enterprise

Answer 5

business that trades for a social and/or environmental purpose

Question 6

lifestyle business

Answer 6

• aim is to grow big enough to provide a return on investment
• aims to provide a good quality of life for the owner