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Unit 2- Forms of business :star: - Coggle Diagram
Unit 2- Forms of business
:star:
Sole traders
= a business organization which has a single owner.
Disadvantages
The owner has unlimited liability
the owner may struggle to raise finance, lenders might think its too risky
The owner and any employees are likely to work longer work hours
Advantages
The business can offer personal service because it is small
The business is independent and the owner has complete control
keeps all the profits
Partnerships
= a business organization that is usually owned by 2-20 people
Advantages
more owners can raise more capital
does not have to publish financial information
partners spread risk (specialist in their areas of expertise)
Disadvantages
have unlimited liability
have to share the profit
partners may have disagreements
Deed of partnership
= a binding legal document that states the formal right of partners
Privated limited companies
=
Advantages
control over the business may be lost
Owners may pay less tax
shareholders have limited liability
Disadvantages
have to publish their financial information
setting up costs are high
profits are shared.
Public limited company
= a company owned by shareholders where the shares can be traded openly on the stock market.
Stock market
= shares are offered to the public for the first time.
Disadvantages
setting up cost is expensive
divorce of ownership and control
difficult to deal with customers
Advantages
can often dominate the market
huge amounts of money can be raised from the sales of share to the public.
production costs may be lower as firms may gain economies of scale
Franchise
= A business model in which the franchisor allows another operator to trade under their name.
Advantages and disadvantages to franchisor
:check: cheaper method of growth because they are funded by the franchisee
:red_cross: poor franchisees may damage reputation
:check: - fast method of growth
:red_cross: have to provide franchisee with training
Advantages and disadvantages to franchisee
:check: are at lower risk - since ideas has been tested
:red_cross: follow strict operating rules
:check: benefit from national marketing organized by the franchisor
:red_cross: profit is shared with franchisor
Lifestyle businesses
= A business that aims to make enough money and provide the flexibility needed to support a particular lifestyle for the owner.
Social enterprises
= A business that trades with the objectives of improving human or environmental well-being charities
limited liability
= owner of a business is only responsible for the amount of money they invested into the business
Unlimited liability
= owner of a business is responsible for any debts and their personal assets may be taken away