There is no distinction in law between the individual owner and the business itself. Their identity is the same
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What is an incorporated business?
This has a legal identity that is separate from the individual owner. As a result these organisations can own assets, owe money and enter into contracts in their own right
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What is unlimited liability?
A situation which the owners of a business are liable for all the debts that the business may incur. This related to unincorporated business eg: sole trader and partnerships
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What is limited liability?
The shareholders of a business have no responsibility for paying debts incurred by their business as long as they have paid in full for their shares that they have purchased. Their personal assets cannot be used.
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What is a sole trader?
A business owned by one person, may be operated on their own or with employees. This is the most basic form of business ownership
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What is a partnership?
Aform of business in which 2 or more people operate for the common goal of making profit, usually unlimited liability. Max 20 partners, more than one invests, are advised to draw up a "deed of partnership"
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What is a "deed of partnership"?
A legal document showing how controlled profit is shared between the partners
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What is a sleeping partner?
They provide finance but don't show control in decision making, they have limited liability
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What is a limited liability partnership?
When at least one partner assumes responsibility for managing and running the business and the others are sleeping partners.
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What is a private limited company (Ltd)?
A company registered with the companies house where shares cannot be sold on the stock market, it is funded by share holders but shares cannot be sold without the agreement of the other shareholders or to the general public
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What is a public limited company (Plc)?
Shares are traded on the stock market which enables them to raise finance more easily
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What are the advantages of being a PLC?
Less risk, more people can buy shares leading to more finance to expand, it also create publicity
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What are the disadvantages of being a PLC?
Costs money to publish accounts, accounts have to be audited, could lose control, more documents are needed
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What is a franchise?
A licence to use a business format of another firm
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What is a franchisee?
A business that pays a royalty for the right to use the format and brand of another firm
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What is a franchisor?
A business that allows other firms to use it's brand and format in exchange for royalty fees
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What are the advantages of franchising for the franchisee?
Already and established brand, tried and tested business format (less risk), marketing is done for you, training is provided, local monopoly
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What are the disadvantages of franchising for the franchisee?
Less freedom to be entrepreneurial, expensive to start with, could have to share profit with the franchisor
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What are the advantages of franchising for the franchisor?
Allows rapid growth, less risk, get fee upfront, franchisee will have local knowledge
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What are the disadvantages of franchising for the franchisor?
Bad press could damage brand, costs to support and to check on franchisee, large franchisees can start to have influence
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What is a lifestyle business?
A business started on the business owners family needs, fits around a lifestyle
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What is an online business?
A business that runs on the internet
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Other cards in this set
Card 2
Front
What is an incorporated business?
Back
This has a legal identity that is separate from the individual owner. As a result these organisations can own assets, owe money and enter into contracts in their own right
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