Chapter 14 Getting Started

Question 1

Why do entrepreneurs start a business?

Answer 1

Independence: Many entrepreneurs enjoy being their own boss and having the freedom to make their own decisions

Challenge: some constantly feel the need to challenge themselves and strive to achieve their full potential

Creativity: having developed an innovative concept or business idea some realise that starting their own business represents the best avenue for achieving their vision

Question 2

What 4 ownership structures are available to startup businesses

Answer 2

Sole trader
Partnership
Private limited company
Co-operative

Question 3

What is a sole trader?

Answer 3

A business which is owned by one person it most common examples include butchers, barbers ect

Question 4

Advantages of a sole trader

Answer 4

• It is easy to set up with very few legal formalities
• The owner has complete control of the business and makes all the major decisions
• The owner keeps all the profits

Question 5

Disadvantages of a sole trader

Answer 5

Lack of capital- since only one person is financing the business there is a limit to the amount of capital available

Lack of business expertise- if the sole trader is new to a business they wouldn’t have all the skills required

Unlimited liability- the liability is not just limited to the amount of capital invested in the business. The sole trader may have to forfeit personal assets in order to pay debts

Question 6

What is a partnership

Answer 6

A business partnership allows for between two and twenty owners thereby providing greater access to capital and skills needed by a business.

Partners are usually advised to sign a legal agreement called a deed of partnership

Question 7

What is the deed of partnership and what issues does it set out

Answer 7

A legal agreement partners are advised to sign when entering a partnership

• amount of capital each partner will provide
• how many votes each partner has
• rules for admitting new partners
• how the partnership will be brought to an end

Question 8

Key issues for a business start up

Answer 8

Ownership structure 
Business location
Sources of finance
Production methods
Marketing mix

Question 9

Partnership advantages

Answer 9

More capital - each partner may bring money and financial resources to the business

Extra skills and shared workload

Less risk- the risk is spread across more people

Question 10

Partnership disadvantages

Answer 10

Profits shared

Less control

Disputes- disagreements may arise over workload or areas of shared responsibility

Question 11

What is a private limited company

Answer 11

It allows up to 149 shareholders to establish a business

Shareholders receive a share of annual profits in the form of dividends

Must be registered with companies registration office

Question 12

Key features of a limited company

Answer 12

Separate legal entity
Continuity of existence
Limited liability

Question 13

Key issues for a business start up

Answer 13

Ownership structure 
Business location
Sources of finance
Production methods
Marketing mix

Question 14

Partnership advantages

Answer 14

More capital - each partner may bring money and financial resources to the business

Extra skills and shared workload

Less risk- the risk is spread across more people

Question 15

Partnership disadvantages

Answer 15

Profits shared

Less control

Disputes- disagreements may arise over workload or areas of shared responsibility

Question 16

What is a private limited company

Answer 16

It allows up to 149 shareholders to establish a business

Shareholders receive a share of annual profits in the form of dividends

Must be registered with companies registration office

Question 17

Key features of a limited company

Answer 17

Separate legal entity
Continuity of existence
Limited liability

Question 18

Continuity of existence feature in private limited company

Answer 18

The company continues to trade irrespective of director or management changes until it’s closed down

Question 19

Limited liability

Answer 19

If the company fails the personal assets are not affected. The shareholders only liability is for the value of the shares

Question 20

Limited company advantages

Answer 20

Limited liability
Separate legal identity
Continuity
Taxation

Question 21

Limited company disadvantages

Answer 21

Set up procedures and costs a very clear procedure needs to be followed and the costs is greater than most other ownership structures

Profits shared. Annual profits are divided amongst all of the shareholders.

Disclosure-all companies are required to make annual submissions to the CRO

Question 22

What is a co-operative business

Answer 22

A group of people working together to achieve a shared goal. Usually owned by shareholders who have a common bond

Avo more originated from a producer co-op

Question 23

Name the different types of co-ops in Ireland

Answer 23

Producer co-ops- they engage in production and processing of crops and farm produce

Community- usually set up to fund some important service for members of the local community.

Financial co-ops credit unions are examples