1.4.1 options for start-up + small businesses

• What’s limited liability?

  The business owners are only responsible for business debts, the creditor can only take assets or finances that belong to the company, doesn't lose personal belongings. Limited liability only applies to certain types of businesses, e.g. private limited companies (LTD)
• What’s unlimited liability?

  The owner is legally responsible for any debts of the business, can lose their personal possessions.
• What’s a sole trader?

  A business that is owned and run by one person
• What are the advantages of a soletrader?

  Makes all decisions,

  Quick and easy to set up,

  Sole trader keeps all the profits,

  Financial information is kept private
• What are the disadvantages of soletraders?

  Unlimited liability,

  Harder to raise money to start or grow the business,

  A lot of pressure on one person,

  No one to cover when the sole trader is ill or takes time off
• What’s a partnership?

  A business with 2 or more owners
• What are the advantages of partnerships?

  Owners may have wider expertise and can share ideas and decision making,

  Owners share the risk,

  Could be easier to raise finance to establish or grow the business
• What are the disadvantages of partnerships?

  Decisions made by one person can affect the partnership,

  No longer exists if one partner leaves,

  Profits are shared

  Partners may disagree

  Unlimited liability
• What is a private limited company?

  Can be a small or large business, owner of the LTD are shareholders - have to be invited before purchasing a share
• What are the advantages of private limited company?

  Limited liability

  Continues to trade if the shareholders change

  Can be easier to raise finance and grow

  Customers may trust an LTD more
• What are the disadvantages of a private limited company?

  More complex to set up,

  Shareholders may disagree,

  Financial information is published and can be accessed by others

  More information must be reported to the government
• Whats a franchise?

  The right given by one business to another business to sell goods or services using its name - by providing a licence.

  To become a part of the franchise a new business must pay a fee.
• What’s a franchisor?

  The business that gives the franchise the right to sell its product or services
• What‘s a franchisee?

  A business that agrees to manufacture, distribute or provide a branded product under license from a franchisor
• What are the advantages of running a franchise?

  Brand image and reputation is already established,

  Expensive marketing costs are already covered by the franchise,

  Access to tried and tested products,

  May have an established customer base,

  Higher chance of survival,

  Specific support and training provided
• What are the disadvantages of running a franchise?

  The cost of the initial investment is high,

  The owner has little freedom to make decisions,

  Franchisee will have to pay a royalty (percentage of sales revenue) to the franchisor

  Restrictions where the franchise can be set up