The Options for Start Up & Small Businesses (Edexcel GCSE Business)
Revision Note
Written by: Steve Vorster
Reviewed by: Jenna Quinn
Limited & Unlimited Liability
When an entrepreneur starts a business, they need to consider what kind of legal structure they want for their business
Sole traders and partnerships offer no legal protection to the owners in that the business assets and the owner's personal assets are viewed as being the same (unlimited liability)
The other forms of business ownership offer limited liability in which the assets of the owners are considered to be separate from those of the business
A Comparison of Unlimited & Limited Liability
Liability | Description | Implications |
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Unlimited liability |
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Limited liability |
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Types of Business Ownership for Start-ups
When an entrepreneur starts a business, they will often start operating as a sole trader
Over time, they may change the form of business to gain more funding or provide more security for the owners by providing limited liability
The different types of business structures available to the owners
Three of the most common forms of business at start up are sole traders, partnerships and private limited (Ltd) companies
Each one of these forms has various advantages and disadvantages associated with the structure
An Explanation of Sole Traders, Partnerships and Private Ltd Companies
Form | Explanation | Advantage | Disadvantage |
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Sole Trader |
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Partnership |
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Private Limited Company (Ltd) |
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Franchising
Franchising is a business model where an individual (franchisee) buys the rights to operate a business model, use its branding and software tools and receive support from a larger company (franchisor) in exchange for an initial lump sum plus ongoing fees
The franchisee operates the business under the franchisor's established system and receives training, marketing support, and ongoing assistance
E.g's include Domino's Pizza, KFC, Burger King
Some of the many food franchises available
The Advantages & Disadvantages of Owning a Franchise
Advantages | Disadvantages |
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Examiner Tip
A franchise is not a form of business ownership; it is an alternative to starting up a brand new business from scratch.
In most cases, Franchisors require businesses to operate as private limited companies, as this ownership type is considered to have more stability than sole traders or partnerships.
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