The Options for Start Up & Small Businesses Flashcards
All 10 cards in this deck
What is unlimited liability?
The owner is personally responsible for all the debts of the business — there is no legal separation between the owner and the business.
What is limited liability?
The business is a separate legal identity, so owners can only lose the money they have invested in it, not their personal possessions.
What is a sole trader?
A business owned and controlled by one person, who has unlimited liability. They may still employ staff.
What is a partnership?
A business owned by two or more partners who share the decisions and the profits, usually with unlimited liability. A deed of partnership sets out the terms.
What is a private limited company (Ltd)?
A business owned by shareholders whose shares cannot be sold to the public; it is a separate legal identity and the shareholders have limited liability.
True or false? A sole trader keeps all of the profit the business makes.
True. But they also carry all of the risk, because they have unlimited liability.
Give one disadvantage of setting up as a private limited company rather than as a sole trader.
More paperwork and cost — accounts must be filed and published at Companies House, and the business is more complex to set up.
What is a franchise?
An arrangement where the franchisee buys the right to trade using an established brand's name, products and business format, paying a fee and royalties to the franchisor.
Give one advantage for a franchisee of running a franchise operation.
Lower risk — the brand is already known and has customers, and the franchisor provides training and support.
Give one disadvantage for a franchisee of running a franchise operation.
They must pay fees and royalties to the franchisor and follow its rules, so they have little freedom over how the business is run.