1.4

• what is limited liability

  the owner is seen as separate from the business in the eyes of the law and therefore their personal possessions cannot be seized to repay business debt
• what is unlimited liability

  there is no legal difference between the business and the owner so their personal possessions can be seized to pay for business debt
• what are types of business ownership that have unlimited liability

  sole traders and partnerships
• what type of business ownership has limited liability

  a private limited company (Ltd)
• what is liability

  the legal responsibility a business has to pay their business's debt
• what is a sole trader

  a business owned by one owner who has full control, although people can be employed as workers
• what are examples of sole traders

  tutor, babysitter, gardener
• what type of liability does a sole trader have

  unlimited
• what are some advantages of a sole trader


  • easy to set up - no fees
  • owner keeps all profits
  • owner is their own boss
  • financial information about the company does not have to be made public
• what are some disadvantages of a sole trader


  • personal belongings are at risk (unlimited liability)
  • difficult to raise money
  • earnings are lost if the owner is sick or takes a holiday
• what is a partnership

  a business owned bytwo or more partners who share control and decision making
• what type of liability do partnerships have

  all partners have unlimited liability unless they set up a limited liability partnership (LLP)
• what are examples of a partnership

  dentists, vets, solicitors
• what are advantages of a partnership

  • more capital can be raised by partners
  • partners can bring a range of skills
  • financial information about the bsuiness does not have to be made public
  • problems and decisions are shared
• what are disadvantages of a partnership


  • unlimited liability
  • partners may have disagreement
  • profits are shared
  • if a partner dies or becomes bankrupt the partnership will have to close
• what is a private limited company

  a business owned by people who know eachother and they are called shareholders
• owners of a private limited company must register as a company and have 'Ltd' after the company name
• what type of liability does a private limited company have

  limited liability
• what are some examples of a private limited company

  moonpig.com cath Kidston, Eddie Stobart
• what are the advantages of a private limited company

  • limited liability
  • shares can be sold to friends and family to raise money
  • managers can be employed to run the business
• what are the disadvanteages of a private limited company

  • there is a legal requirement to file company accounts and this information is public
  • there is more admin involved in starting up an private limited company
  • shares cannot be sold to the public
• what is a franchise


  an arrangement between an established business that allows other businesses or indivduals the right to sell goods and services ysing it's name, trademark and business processes
• what is a franchisor

  an established business that allows franchisees to use the company name
• a franchisee buys into an established business but operates as an independent business
• what are some examples of a franchise

  costa, subway, mcdonalds
• what is the fee a franchisee pays to the franchisor called

  royalty
• what are the disadvantages to the franchisee

  • startup fees can be expensive
  • franchisor is payed a percentage of the revenue
  • there is little control and flexibility
  • complicated application process
• what are the advantages to the franchisee


  • the brand and customer base is already established
  • there is a high chance the business will be successful
  • support and training is provided by the franchisor
• what is business location

  the place where a business operates
• what are the factors that affect business location

  • nature of the business
  • market
  • labour
  • materials
  • competitors
• where do businesses in the primary sector need to locate

  where the raw materials are located
• where do businesses in the secondary sector need to be located

  areas where transport links are good so materials can be brought in with ease and finished products can be sent out to be sold
• businesses in the secondary market must be located near skilled labour
• some business operate solely online or from the business owners home
• where do businesses in the tertiary market need to locate

  close to or with easy access to their customers
• locating close to other businesses can be important e.g a cafe on a high street so tired shoppers can rest
• customers need to have easy access to goods and services in order to buy them
• a business needs to be near suitably skilled staff who are willing to work for the wages offered by the business
• why is it important for businesses that use raw materials that are bulky or heavy to be located near them

  to lower the production costs of the company
• customers often want a choice so a startup may locate near competitors as this is where the customers are