Forms of business

• What does liability refer to in business?

  Legal responsibility of a business
• What are the two types of liability in business?

  • Unlimited Liability
  • Limited Liability
• What is unlimited liability?

  Owner and business are the same entity
• What is limited liability?

  Business and owner are separate entities
• What are the types of business ownership?

  • Sole traders
  • Partnerships
  • Private Limited Companies (Ltd)
  • Public Limited Companies (PLC)
• What is a sole trader?

  A person who runs their own business
• What are the advantages of being a sole trader?

  • Keeps all the profit
  • Complete control of the business
  • Quick and easy to set up
• What are the disadvantages of being a sole trader?

  • No economies of scale
  • Long working hours likely
  • Difficulty in obtaining finance
  • Unlimited liability
• How many people can own a partnership?

  2 to 20 people
• What are the advantages of a partnership?

  • Different skills and expertise
  • Ability to raise more capital
  • Quick and easy to set up
• What is a Private Limited Company (Ltd)?

  A business owned by shareholders, not publicly traded
• What are the advantages of a Private Limited Company?

  • Limited liability
  • Can sell shares to raise capital
• What is a Public Limited Company (PLC)?

  A business whose shares are traded on the stock exchange
• What are the objectives of businesses?

  • Making a profit
  • Increasing sales
  • Expanding to new markets
  • Improving customer satisfaction
  • Being environmentally friendly
• What is the main objective of a new startup business?

  Survival
• What is flotation in business?

  Switching from private to public company
• What is the process of flotation?

  1. Advertise with a prospectus
  2. Review by lawyers
  3. £50,000 upfront payment
  4. Initial Public Offering (IPO)
• What are the advantages of stock market flotation?

  • Raise finance through share capital
  • Limited liability
  • Increased public awareness
• What are the disadvantages of stock market flotation?

  • Risk of being taken over
  • More public scrutiny
  • Shareholders influence business operations
• What is a franchise?

  Right to trade under another business's name
• What are the advantages of a franchise?

  • Established brand and customer base
  • Support and training from franchisor
  • Lower risk than starting a new business
• What are the disadvantages of a franchise?

  • High initial fees and ongoing royalties
  • Limited control over operations
  • Reputation depends on franchisor's actions