Entrepreneurs Flashcards
What is an Entrepreneur?
An Entrepreneur is the one that takes the enterprise and develops the business idea. This involves taking risks, combining the factors of production and making decisions
What are the 3 types of Entrepreneurs?
-Sole Trader
-Partnership
-Private Limited Company (Ltd)
What is a sole trader?
A business owned and controlled by one individual, they are their own boss. They have unlimited liability (responsible for everything)
What is a Partnership?
A business owned and controlled by between 2 and 20 people who agree to jointly operate a business with a goal of making profit
What is a Private Limited Company?
A business owned by shareholders and controlled by a board of directors. Separate legal identity from their owners
What is a franchise?
A franchisee is a person who has paid a franchiser to own a part of their company, it sells the right to use their original name and idea
What are the advantages of being a sole trader?
-All profits ads 100% your own
-You are your own boss (flexible working times to suit yourself)
-Don’t need to trust any other employees
-Fewer rules and regulations compared to other types of organisations
-Not required to disclose financial information to the public
What are the disadvantages of being a sole trader?
-Unlimited liability (responsible for everything)
-Finance is restricted
-Owner has no on to share problems and work load with
-Work may stop if owner is sick or on holiday. If not it is difficult to find someone to trust in their absence
-Sole traders take on all the risks of starting and running their own business. They are responsible for all the losses.
What are the advantages of being a partnership organisation?
-Partners can bring in areas of expertise
-More finance is available
-Workload can be shared
-Easier to raise finance from lenders
What are the disadvantages of being a partnership organisation?
-Partners have unlimited liability
-Profits have to be shared between partners
-Partners may disagree
-If one partner leaves or dies a new partnership agreement has to be set up
What are the advantages of being a private limited company?
-Shareholders have limited personal liability, protecting their personal assets from business debts and obligations
-Limited companies are able to raise more money by borrowing and through the share issue of ordinary shares
What are the disadvantages of being a private limited company?
-The legal set up costs of setting up and running a company can be expensive, involving lawyers and accountants
-Certain information such as financial statements need to be disclosed to regulatory authorities and made public
-Because profits are only shared with shareholders it can be harder to motivate employees who do not hold shares.
