1.4

• What are the two types of liability mentioned in the study material?

  Limited and unlimited liability
• What does limited liability mean for investors?

  Investors can only lose their investment
• Who is responsible for the full debt in unlimited liability situations?

  The same owners are responsible
• What is a sole trader?

  A person who sets up a business on their own
• What is the legal status of a sole trader?

  A sole trader is unincorporated and has unlimited liability
• What tax do sole traders pay on their profits?

  Income tax
• What are the benefits and drawbacks of being a sole trader?

  Benefits:

  • Quick and easy to set up
  • Little paperwork
  • Owner makes all decisions and keeps all profits

  
  

  Drawbacks:

  • Unlimited liability
  • Limited access to finance
  • High pressure and stress from decision-making
• What is a partnership?

  A business set up by two or more people together
• What is the purpose of a deed of partnership?

  It sets up rules such as how profits are shared
• What is usually the liability type in partnerships?

  Usually unlimited liability
• What are the benefits and drawbacks of partnerships?

  Benefits:

  • Shared responsibility reduces stress
  • Shared decision-making
  • Ability to specialize

  
  

  Drawbacks:

  • Risk of unlimited liability
  • Personal risk for partners
  • Potential for conflict between owners
  • Profits must be shared
• What is a private limited company (Ltd)?

  An incorporated business with a separate legal identity from its owners
• Who owns a private limited company?

  Shareholders
• What is the main advantage of limited liability for owners of a private limited company?

  Owners have limited liability for company debts
• What must a private limited company do to operate legally?

  Register at Companies House
• What are the drawbacks of private limited companies?

  • Owners have limited liability
  • More paperwork involved
  • New shareholders must be invited to join
  • Professional help may be needed to set up
  • Shared control and profits (dividends)
• How does the liability of a private limited company differ from that of a sole trader?

  A private limited company has limited liability, while a sole trader has unlimited liability
• What is the role of the board of directors in a private limited company?

  They manage the business on a day-to-day basis
• What is a potential drawback of having new shareholders in a private limited company?

  It can lead to a loss of control for existing owners
• What is a potential benefit of selling shares in a private limited company?

  It can raise money for running the business
• How does the financial risk differ between sole traders and partnerships?

  Partnerships share financial risk, while sole traders bear it all
• What is a common challenge faced by sole traders when competing with established businesses?

  Limited access to finance
• What is a potential source of stress for sole traders?

  Making all decisions alone
• How can partnerships help reduce stress for business owners?

  By sharing responsibility and decision-making
• What might lead to conflict in a partnership?

  Differences in decision-making among owners
• What is the significance of the corporation tax for private limited companies?

  It is a tax paid on the company's profits
• What is a potential benefit of being a shareholder in a private limited company?

  Receiving dividends from profits
• What is a franchise?

  A business that gives the right to another person or business to sell goods or services using its name
• What is the role of a franchisee?

  A franchisee agrees to manufacture, distribute, or sell branded products under the license of a franchisor
• What is the role of a franchisor?

  A franchisor gives franchisees the right to manufacture, distribute, or sell its branded products
• What does a franchisee pay to the franchisor?

  A fixed sum of money or royalty payment
• What are the advantages of being a franchisee?

  • Access to free training and marketing
  • Part of an established business
  • Easier to make money
  • Lower risk for a new entrepreneur
• What are the disadvantages of being a franchisee?

  • Franchisee has to pay a percentage of profits as royalties
  • Can be expensive
  • Cannot make individual business decisions without consulting the franchisor
  • Other franchises can cause local competition
• What is the definition of business location?

  The place where a business operates
• What factors influence location decisions for businesses?

  Proximity to market, labor, materials, and competitors
• Why is proximity to the market important for some businesses?

  Being close to customers can enhance sales
• How does e-commerce affect the importance of location for businesses?

  1. commerce allows businesses to choose cheaper locations as they don't need to be near customers
• What is a convenience good?

  A product that a customer buys frequently
• How do shopping goods differ from convenience goods in terms of location strategy?

  Shopping goods are often located near competitors for comparison
• What is e-commerce?

  Using the internet to carry out business transactions