Sole Trader
How many people manage a Sole trader business? Give an example of a sole trader:
Owned and managed by one person.
EX: plumber, tutor, local florist, gardener.
Define partnership
A business formed by 2 or more people who share responsibility for day to day runnings of the business.
Define Shareholders
A person or organization who own (units of ownership of a company) shares in a limited company.
Define Franchise
A business system where entreprenures buy the right to use the name, logo and product of an existing business.
Define Joint Venture:
Two or more businesses agree to work together on. project and set up a separate business for this purpose.
Define Start up capital:
Th finance needed when first setting up a business
Name 3 advantages of a Partnership
Greater access to finance than sole traders - more than one person investing capital into business.
Shared decision making & managing the business, reducing work load of business.
Easy to set up - must sign deed of partnership
What similarities for Private and Public limited companies share?
Legal documents.
Shareholders invest capital.
Ordinary shareholders - are owners of the company.
Both have limited liability.
Business continues even if shareholders die.
Raise finance through selling shares.
Profit belongs to ordinary share holders.
Profit shared through dividends.
Financial statements must be publicized.
Who is the franchisor?
The owner of a successful business who agrees to allow another person use the franchises trade name.
Advantages of a Joint ventiure
Reduces risk for each busines & cuts costs.
Each business brings different expertise.
Market & product knowledge can be shared,
Name three advantages of being a sole trader:
Quick & easy to set up a business.
Makes all the decisions / has complete control of business.
Small amount of start up capital.
Owner keeps all the profit.
What is a Deed of Partnership?
A legal agreement that sets out the rights and obligations of each partner.
Name 3 Differences between private and limited companies
Private limited companies:
small number of shareholders.
small in size
can only be sold privately.
difficult to sell because must be sold privately.
Ownership not sperated from control.
Difficult to raise finance- offeres collateral.
Who's is the Franchisee?
Buys the rights to use the brands logo, trade name, and products.
Limitations of Joint ventures.
Mistakes made by any of the other businesses may damage reputation of all other firms.
Business may have different business cultures / leadership styles.
Difficult to make decisions
Name three Disadvantages of being a sole trader:
Owner has unlimited liability for the debts of a business.
Difficult to raise funds to expand business.
Difficult to compete with larger firms in same industry.
Lack of essential business skills to run a business.
Work long hours.
If Sole trader retires the business no longer exists.
Name three disadvantages of a Partnership:
Have unlimited liability - meaning they are fully liable for debts of business.
Partners must share profits.
If one partner leaves the business, business will cease to exist and needs to be re-formed.
Business decisions are binding on all partners.
Difficult to raise additional funds.
What is collateral?
Non-current asset offerd as security against borrowing.
Name three benefits of a Franchise:
Less chance of a business failure.
Franchisor - provides advice and training ,
checks quality of suppliers
Franchisee - guaranteed quality supplies.
what is a vertical joint venture
One produces the other one in a supply chain.
EX: Uber & Volvo
Define the difference between Limited Liability and Unlimited liability
Unlimited liability, means that the owner are personally responsible for all of the company’s debts and obligations. If the business is sued or cannot pay its debts, the owners may have to use their personal assets to satisfy the liabilities.
Limited liability means that the owners of the business are only liable for the amount of money they have invested in the business. Their personal assets are not at risk if the company incurs debts or legal liabilities.
Why are partnerships often formed?
Give en example of Partnerships
to overcome some of the disadvantages of sole traders.
EX: Law , Dentistry, doctors offices ect.
What is an unincorporated business?
A business that does not have legal identity separate from its owners. The owners have unlimited liability for business debts.
EX- Sole trader & Partnership
Name three Limitations of a Franchise:
Initial costs can be expensive.
Franchisor takes percentage of revenue profits.
Strict controls over how to manage the product.
What is the difference between Partnership and joint venture.
Partnership creating a new business entity together with two people.
Joint venture is when two different companies create a project together.