1.4

Question 1

Limited liability

Answer 1

Limited liability means that the business owner or owners are only responsible for business debts up to the value of their financial investment in the business

Question 2

Unlimited liability

Answer 2

Unlimited liability means that the business owner or owners are personally responsible for all of the debts of the business, no matter what the value.

Question 3

Sole trader

Answer 3

A sole trader is a business that is owned and run by one person.For example, photographers, electricians, hairdressers, graphic designers, social media influencers,

Question 4

Sole traders have

Answer 4

unlimited liability and the owner is personally responsible for the debts of the business.

Question 5

Some advantages of sole trading

Answer 5

it is quick and easy to set up as a sole trader

the business owner will have a lot of control over the business and its money

Question 6

Some disadvantages of sole trading

Answer 6

it has the risk of unlimited liability
it can involve long work hours and stressful conditions
there is a high level of responsibility for the owner

Question 7

Partnership

Answer 7

A partnership is a type of business that has 2 or more owners. They decide to set up and run a business between them.Partnerships are often found in businesses that provide a professional service, such as lawyers, doctors.

Question 8

Some advantages of partnerships

Answer 8

they are usually quick and easy to set up

there is shared decision-making by the owners

Question 9

Some disadvantages of partnerships

Answer 9

they can involve long work hours
conflict amongst owners can occur
there is the risk of unlimited liability

Question 10

Private limited company

Answer 10

A private limited company can be a small or large business. A private limited company has limited liability.The owners of a private limited company are known as shareholders. Shareholders have to be invited by the business before they can purchase a share of the business. A share is a portion or percentage of a company.

Question 11

franchise

Answer 11

the right given by one business to another to sell goods using its name

Question 12

franchisee

Answer 12

a business that agrees to manufacture, distribute or sell branded products under the licence of a franchisor

Question 13

franchisor

Answer 13

a business that gives franchisees the right to manufacture, distribute or sell its branded products in return for a fixed sum of money or royalty payment

Question 14

Some advantages of setting up a franchise

Answer 14

the franchisee gets access to free training and marketing
the franchisee is part of an established business
it can be easier to make money

Question 15

Some disadvantages of setting up a franchise

Answer 15

the franchisee has to pay a percentage of its profits to the franchisor. This is known as royalties
it can be expensive to set up
the franchisee cannot make individual business decisions without consulting the franchisor

Question 16

Proximity to the market

Answer 16

The term market refers to a business’ customers and consumers. For businesses such as takeaways, corner shops, clothes shops, pop-up food businesses and hairdressers, being close to their market is extremely important. If these businesses were not close to their market, they would miss out on sales as they would not be easily accessible to their target market.

Question 17

Proximity to labour

Answer 17

The term labour refers to people whom a business employs or would potentially want to employ. For most companies, it is important to be close to high-quality labour or to be located in an area to which employees are willing to travel.

Businesses need to make sure they are located in an area that has people with skills relevant to the job role. I

Question 18

Proximity to materials

Answer 18

For some products, being close to the raw materials is extremely important for saving money.

Question 19

E-commerce

Answer 19

is any transaction that takes place through the internet.