Forms Of Business Flashcards

(23 cards)

1
Q

What is a sole trader?

A

A single person who is the exclusive owner of a business

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2
Q

Advantages of a sole trader

A
  • easiest type of business to set up
  • sole trader gets to be their own boss
  • sole trader decides what to do with the profit
  • easy to change the legal structure if circumstances change
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3
Q

Disadvantages of a sole trader

A
  • unlimited liability means that there is no legal distinction between the sole trader’s assets and the business’ assets
  • hard to raise finance
  • it can be hard to retain good employees as they aren’t necessarily given a share of the profits
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4
Q

What is the term used to describe the lack of distinction between a sole trader’s assets and their business’ assets?

A

Unlimited liability

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5
Q

Example of a sole trader

A

Hairdressers

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6
Q

What is a partnership?

A

A business owned by two or more partners who have an equal share of the profits and an equal say in the decision making process

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7
Q

Advantages of partnerships

A
  • more people means more experience and more ideas
  • easier to raise capital
  • partners can specialise in their area of expertise
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8
Q

Disadvantages of partnerships

A
  • unlimited liability
  • shared profits
  • could be conflict over business decisions
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9
Q

Example of partnership

A

Solicitors

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10
Q

What are not-for-profit organisations?

A

A business where profit is reinvested into the business

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11
Q

What objectives do not-for-profit organisations have

A

Social objectives

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12
Q

What is a social enterprise?

A

Make profit by selling goods or services but reinvest this profit to support their social aim

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13
Q

Example of a social enterprise

A

The Big Issue

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14
Q

What is an unincorporated association

A

Managers get no profit and are legally responsible for all of the organisation’s debt

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15
Q

What is a charity

A

A business that is eligible for tax relief and can apply for certain grants.

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16
Q

What is a franchise?

A

A business where the owner (franchisor) gives someone the right to sell its products and use its trademarks.

17
Q

Advantages of a franchise

A
  • can expand without needing large amounts of investment
  • increases brand awareness
  • business does not have to worry about some of the risks of becoming a larger corporation
18
Q

Disadvantages of franchise

A
  • franchisee does not have complete control over how they operate
  • if a franchise is run badly, then a single store can negatively affect the brand image
19
Q

What is a public limited company (PLC)?

A

A business that has raised capital by selling shares to the public on the Stock Exchange

20
Q

Advantages of becoming a PLC

A
  • can raise additional capital be selling shares
  • PLCs are usually regarded as large and well-established businesses which can raise their reputation
21
Q

Disadvantages of becoming a PLC

A
  • have to comply with strict accounting and reporting procedures which can be complex and time-consuming
  • face greater scrutiny from the public as a result of their size and influence
22
Q

What is meant by ‘floating on the stock exchange’?

A

A business sells its shares to investors

23
Q

Benefits of floating on the stock exchange

A
  • can raise lots of capital
  • access long-term investment
  • become more well-established and well-known