Types of Business Ownership Flashcards
(23 cards)
What is a Sole Trader?
Owned and operated by one individual.
Simple to establish with minimal legal requirements.
What is a key characteristic of a Sole Trader’s liability?
Subject to unlimited liability, meaning personal assets are at risk if the business incurs debts.
What is a Partnership?
Business owned by two or more individuals.
Partners share responsibilities, profits, and decision-making.
What type of liability do partners in a partnership have?
Each partner is personally liable for business debts (unlimited liability).
What is a Private Limited Company (Ltd)?
Owned by shareholders; shares are not available to the general public.
Shareholders’ liability is limited to their investment.
What is a disadvantage of setting up a Private Limited Company?
More complex and costly to set up due to legal requirements.
What must a Private Limited Company do to operate legally?
Must register with Companies House and adhere to reporting standards.
Define Unlimited Liability.
Applies to sole traders and partnerships where owners are personally responsible for all business debts.
What is Limited Liability?
Applies to private limited companies where shareholders are only liable up to the amount they invested.
What does Limited Liability protect?
Personal assets are protected from business debts.
What type of ownership structure is suitable for individuals seeking full control?
Sole Trader.
What type of ownership structure is ideal for professionals wishing to share responsibilities?
Partnership.
What type of ownership structure is appropriate for businesses seeking investment while protecting owners’ personal assets?
Private Limited Company.
What is a franchise?
A business model where an individual (franchisee) purchases the rights to operate under an established company’s (franchisor’s) brand and system.
What does the franchisee pay to the franchisor?
An initial fee and ongoing royalties.
What support does the franchisor provide to the franchisee?
Training, support, and marketing assistance.
What is an advantage for the franchisee?
Access to a proven business model with established brand recognition.
What is a disadvantage for the franchisee?
Initial franchise fees and ongoing royalty payments can be substantial.
What is a potential disadvantage for the franchisor?
Maintaining consistent quality and brand standards across franchises can be challenging.
What type of franchises are mentioned as examples?
Fast-food chains like McDonald’s, Subway, and KFC.
Fill in the blank: The franchisee must adhere to the franchisor’s _______.
rules and guidelines.
True or False: Franchisees have complete autonomy in decision-making.
False.
What is a key advantage for the franchisor?
Rapid expansion with reduced capital investment.
