1.4.1 The options for start-up and small business

Question 1

Who have unlimited liability?

Answer 1

• sole traders

- partnerships

Question 2

Who have limited liability?

Answer 2

• Private limited company (Ltd)

- Public limited company (Plc)

Question 3

What are the advantages of being a sole trader?

Answer 3

• make all of the decisions
• quick and easy to set up
• sole trader keeps all of the profit
• financial information is kept private

Question 4

What are the disadvantages of being a sole trader?

Answer 4

• unlimited liability
• harder to raise money to start or grow the business
• a lot of pressure on one person
• no one to cover when sole trader is ill or takes time off

Question 5

What are the advantages of being a partnership?

Answer 5

• owners may have wider expertise and can share ideas and decision-making
• owners share the risk
• could be easier to raise finance to establish or grow the business

Question 6

What are the disadvantages of being a partnership?

Answer 6

• decisions made by one partner can affect all partners
• no longer exists if one partner leaves
• profits are shared
• partners may disagree

Question 7

What are the advantages of being a private limited company?

Answer 7

• owners have limited liability
• customers may trust a ‘Ltd’ more than other businesses
• continues to trade even if the shareholders change
• could be easier to raise finance to establish or grow the business

Question 8

What are the disadvantages of being a private limited company?

Answer 8

• more complex to set up than a sole trader or partnership
• shareholders may disagree
• financial information is published and can be accessed by others
• more information must be reported to the government

Question 9

What are the benefits of running a franchise?

Answer 9

• brand image and reputation is already established
• expensive marketing costs are covered by the franchise
• access to tried-and-tested products
• may have an established customer base
• higher chance of survival
• specific support and training provided

Question 10

What are the drawbacks of running a franchise?

Answer 10

• the cost of the initial investment can be high
• the owner has little freedom to make decisions
• franchisee will have to pay royalty to the franchisor
• restrictions on where the franchise can be set up