options for start-up & small business

• Limited liability-

  restricting the losses suffered by owners/shareholders to the sum they invested in the business. the liability for debt is limited
• • limited liability means
  • if the company fails then an independent accountant takes control tries to raise as much money as possible to repay the business debts.
  • the shareholder only lose money they invested
• • unlimited liability - sole trader or partnership
  • When the business and owner are inseparable, they must settle debts with personal assets. the individuals are responsible for the failed business.
• • types of business ownership for start ups
  • sole trader
  • partnerships
  • private limited company
• • sole trader -
  • 
a business run by one person, the person has unlimited liability for any business debts
• • advantages of sole traders -
  • can start trading immediately
  • have 100% control
  • no paperwork
  • reward is all for them
• • disadvantages of sole trader-
  • unlimited liability
  • 100% responsibility so hard for holidays and illnesses
  • lots of risk
• • partnership-
  • 
unlimited liability but with more than one owner
• • advantages of partnerships-
  • liability is spread between partners
  • complementary skills may enhance the business
• • disadvantages of partnerships-
  • unlimited liability, including for the business debts that come from your partners
  • possible clashes if one partner seeks control
• • private limited company -
  • small family business in which shareholders enjoy limited liability. shares are sold to friends and family
• • advantages of private limited companies-
  • limited liability
  • can sell shares to outside investors
  • the business can continue even if the founder dies because shares can be passed to others
• • disadvantages of private limited companies-
  • risk of losing control
  • cost of starting up and getting accounts audited every year
• • franchising-
  • 
paying a business owner for the right to use an established business name, branding and business methods
• • advantages of franchising-
  • franchisee can use recognisable logo and name and tried and tested method
  • franchisees will pay into central fund for advertising so franchise can be advertised nationally
  • lower failure rate than independent start ups so banks are more willing to lend money
• • disadvantages of franchising -
  • royalty payments must be paid to franchisor which could be a lot
  • buying franchise is expensive
  • if franchisor falls so does franchisees
  • bad reputation of franchises can’t do it right