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Questions and Answers
Which form of business offers minimal legal and financial protection to the owner?
In a Sole Trader business, who is personally responsible for all debts and obligations?
Which type of business involves granting permission to another party to use brand name, products, and services in exchange for fees?
Which form of business has the advantage of brand recognition for the franchisee?
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Which form of business generally faces fewer reporting requirements compared to others?
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In a franchise business, who grants permission to use brand name and systems?
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What is a key feature of a private limited company?
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Which type of business aims to create positive social change in addition to revenue generation?
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What differentiates a public limited company from a private limited company in terms of ownership?
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How can franchisees benefit from franchisors in terms of business strategies?
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What is a common characteristic of a lifestyle business?
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In which type of business are profits taxed at the company level before shareholders pay income tax on dividends?
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What is the relationship between the franchisor and franchisee in a franchising agreement?
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What financial obligation does a franchisee typically have towards the franchisor after purchasing a franchise?
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What support might a franchisor provide to a franchisee in a franchising agreement?
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Why is buying a franchise considered a good way for an individual to start a business?
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In comparison to setting up as a sole trader, how does establishing a franchise business differ?
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What is a key advantage to the franchisor of growing a business using franchising?
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Why do franchisees benefit from less investment at the start-up stage?
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What is a common drawback faced by franchisees in setting up a franchise?
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Why do franchisees face lower chances of failure compared to new businesses?
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What is a significant disadvantage faced by franchisees in terms of buying a franchise?
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Study Notes
Forms of Business
Businesses come in various forms, each with its distinct characteristics and advantages. Understanding these forms is crucial for aspiring entrepreneurs and investors alike. In this article, we delve into six primary forms of business: Sole Trader, Franchise, Private Limited Company, Public Limited Company (PLC), Social Enterprise, and Lifestyle Business.
Sole Trader
A sole trader, also known as a sole proprietorship, is an unincorporated business owned by one individual. It's the simplest form of business, offering minimal legal and financial protection to the owner. Key features include:
- Easy and inexpensive to set up: No formal registration or paperwork required.
- Full control: The sole trader has complete decision-making authority over the business.
- Personal liability: The owner is personally responsible for all debts and obligations of the business.
- Taxation: Income is considered personal income and taxed once.
- Few regulations: Sole traders generally face fewer reporting requirements than other types of businesses.
Franchise
A franchise is a type of business where a company (the franchisor) grants permission to another party (the franchisee) to use its brand name, products, services, and systems in exchange for fees paid by the franchisee. Key features include:
- Brand recognition: Franchisees benefit from the franchisor's established reputation.
- Training and support: Franchisors often provide training, marketing assistance, and ongoing guidance.
- Proven business model: Franchisees can leverage the franchisor's successful business strategies.
- Financing options: Some franchisors offer financing and lease options for franchisees.
Private Limited Company
A private limited company (PLC) is a type of company where ownership shares are privately owned rather than publicly traded. Key features include:
- Limited liability: Shareholders' personal assets are protected against business debts and liabilities.
- Flexible structure: A private limited company can raise capital through share sales without becoming a public company.
- Ownership control: Owners retain full control of their business without interference from external shareholders.
- Taxation: Profits are taxed at the company level, and then shareholders pay income tax on dividends received.
Public Limited Company (PLC)
A public limited company is a type of company whose shares are publicly listed and traded on a stock exchange. Key features include:
- Ownership dispersal: Ownership is spread among various shareholders, reducing concentration risk.
- Transparency: Public companies must disclose financial statements and other key information to the public.
- Raising funds: Public limited companies can issue shares to raise additional capital for expansion.
- Regulation: Strict rules regarding governance, transparency, and reporting ensure public confidence in the company.
Social Enterprise
A social enterprise is a business that aims to create positive social change alongside generating revenue. Key features include:
- Social mission: Social enterprises focus on addressing social issues or creating sustainable solutions.
- Business model: They generate income through selling goods and services like traditional businesses.
- Legal forms: Social enterprises can take various legal forms, such as charities, cooperatives, or companies limited by guarantee.
- Financing: Social enterprises can access both traditional business financing and grants or loans specifically designed for social enterprises.
Lifestyle Business
A lifestyle business is a type of business where the primary goal is not necessarily profit but rather achieving a desired lifestyle or work-life balance. Key features include:
- Flexibility: Owners have control over their hours and work environment, allowing for better personal balance.
- Autonomy: Decision-making power remains within the owner's hands, enabling them to align their work with their values and preferences.
- Scalability: These businesses are often small and less geared towards rapid growth, focusing instead on maintaining a comfortable lifestyle.
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Description
Learn about six primary forms of business including Sole Trader, Franchise, Private Limited Company, Public Limited Company, Social Enterprise, and Lifestyle Business. Understand the key features and characteristics of each form to make informed decisions in the business world.
