5.3 Getting Started In Business Flashcards
(31 cards)
What are the 3 main choices facing an entrepreneur setting up a business?
Organisational options, Production options, Finance options
What are the 4 types of organisational structures?
- Sole Trader
- Partnership
- Private Limited Company (Ltd / DAC)
- Franchise
Define a Sole Trader. List 2 characteristics.
A business owned and run by one person.
- Unlimited liability.
- No continuity of existence.
Give 3 advantages of being a Sole Trader.
- Easy to set up.
- Keeps all profits.
- Makes decisions quickly and independently.
Give 3 disadvantages of being a Sole Trader.
- Unlimited liability.
- Limited access to capital.
- No continuity if the owner dies.
What is a Partnership?
A business formed by 2–20 people to make a profit, with shared responsibility and unlimited liability.
Give 2 advantages of a Partnership.
- More capital available.
- Shared expertise and skills.
Give 2 disadvantages of a Partnership.
- Unlimited liability.
- Potential for disagreements.
What is a Deed of Partnership and what does it include?
A legal document that outlines:
- Finance contributed
- Profit-sharing
- Rules for new partners
- How to end the partnership
What is a Private Limited Company (Ltd/DAC)?
A business owned by 1–149 shareholders with limited liability and separate legal existence.
Advantages of a Private Limited Company? (3 examples)
- Limited liability
- Continuity of existence
- Can raise more finance
Disadvantages of a Private Limited Company? (2 examples)
- Expensive and complex to set up
- Must publish accounts and follow strict legal rules
Name the 3 documents needed to set up a Private Limited Company.
- Memorandum of Association
- Articles of Association
- Form A1
What is a Franchise?
A business model where a franchisee gets permission (and pays fees) to use the name and products of a franchisor.
2 Benefits and 2 Drawbacks of a Franchise
Benefits:
1. Lower risk, known brand
2. Training and advertising support
Drawbacks:
1. High initial costs
2. Limited freedom (strict rules)
Name the 4 production options.
- Job production
- Batch production
- Mass production
- Subcontracting/Outsourcing
What is Job Production?
Making one-off items for individual customers using skilled labour.
Example: Custom cake, tailored suit
Give 1 advantage and 1 disadvantage of Job Production.
Advantage: High-quality, personalised service
Disadvantage: Expensive and time-consuming
What is Batch Production?
Making a set number of identical goods at once.
Example: Bread, books
Advantage & Disadvantage of Batch Production
Advantage: More efficient, less waste
Disadvantage: Needs good planning and equipment
What is Mass Production?
Continuous production of identical goods using automation.
Example: Cornflakes
One advantage and one disadvantage of Mass Production?
Advantage: Very low cost per unit
Disadvantage: High machinery cost and repetitive work
What is Subcontracting/Outsourcing?
Hiring external producers to make some or all of the product.
Give one advantage and one disadvantage of outsourcing.
Advantage: Focus on marketing; cheaper production
Disadvantage: Less control over quality/timing
