Which term describes a business that is owned, controlled and run by one person, who keeps all of the profits and is personally responsible for all of the losses?
Sole trader
Which term describes a business owned by two or more people who share the profits, the losses and the responsibility for running it?
Partnership
What is meant by unlimited liability?
The owners are personally responsible for all of the debts of the business, with no upper limit
What is the name for a business that is legally separate from its owners, can offer shares to friends and family in return for funding, and where the owners are not personally responsible for the debts of the business?
Private limited company (Ltd)
What is meant by a franchisee?
A person who pays a fee and ongoing royalties to trade under the name and brand of an established business
What is meant by limited liability?
The owners can only lose the money that they have invested in the business
In which forms of ownership are the owners personally responsible for all of the debts of the business?
Sole trader and partnership
Which term describes the money paid to shareholders out of a limited company's profits?
A dividend
Priya has very little money and wants to start trading as quickly as possible. Which form of ownership is most suitable?
Sole trader
Marco's sole trader business closes owing money to suppliers. What is Marco responsible for?
All of the debts, which he may have to pay from his own savings
A private limited company is legally separate from its owners. What does this mean for the owners?
Their personal assets are protected if the company cannot pay its debts
How does a limited liability partnership differ from an ordinary partnership?
Each partner is only liable for the amount they personally invested
Which term describes the established business that grants a start-up the right to trade under its brand name?
A franchisor
Which of these is a disadvantage for the franchisee of operating as a franchise?
Royalties must be paid to the franchisor based on revenue
Why might decisions take longer to make in a partnership than in a sole trader enterprise?
All of the partners must be consulted before decisions are made
Which is an advantage of setting up an enterprise as a partnership rather than as a sole trader?
The workload and responsibility can be shared between the owners
How is profit usually distributed to the owners of a private limited company?
Shareholders receive a dividend based on the number of shares they own
Which is a disadvantage for the owners of trading as a private limited company?
The company accounts must be made available for the public to see
Why might a new entrepreneur decide to buy a franchise instead of setting up an independent business?
Customers already know the brand and the business systems are established
Rob runs a franchise of a pizza brand. Which decision is likely to be made by the franchisor rather than by Rob?
Which suppliers the business must buy its ingredients from
Amir is a sole trader plumber. He breaks his arm and cannot work for three months. Which disadvantage does this show?
There is no one else to run the business or cover his work
Ellie and Sam set up a partnership and agree a 60:40 split of any profits. What does this show about how partnerships distribute profit?
The profits are divided according to the share split the partners agreed
A sole trader needs more money to expand the enterprise. Why might becoming a private limited company (Ltd) help?
The company can sell shares to friends and family to raise finance
Kasia runs a cake decorating enterprise on her own. Which is an advantage of being a sole trader rather than taking on a partner?
She keeps all of the profit and makes all of the decisions herself
Which term describes an online appeal where members of the public each give a small amount of money towards a target?
Crowdfunding
What is meant by 'business angel'?
An individual who invests money in an enterprise in return for a share of the business and its profits
What is the name for a lump sum provided by a bank that is repaid in monthly instalments with interest over a period of time?
A loan
What is meant by 'grants' as a source of capital?
A cash injection from a government or charity that does not usually need to be paid back
Which term describes using money that the owner has already put aside to finance a start-up, with no fees, interest or repayments to make?
Own savings
What is meant by 'friends and family' as a source of capital?
Money given or lent to a start-up by people the owner knows, which may be a gift or a loan
A loan is repaid with interest. What is meant by interest?
An extra amount charged for borrowing the money
In a crowdfunding appeal, what is meant by the funding target?
The amount of money the appeal is trying to raise
A crowdfunding appeal does not reach its funding target. What happens?
The money is returned to the investors and the business gets nothing
Why is a grant often an attractive source of capital for a start-up?
It does not usually have to be paid back
Which of the following is a disadvantage of using a grant as a source of capital?
Only certain types of business are eligible for the grant
Which of the following is an advantage of using your own savings to start a business?
There are no interest payments or fees to pay on the money
Which statement about money given by friends and family to a start-up is correct?
It may be given as a gift, which does not need to be repaid
Which of the following is a possible disadvantage of using a loan from a friend to start a business?
The arrangement may be unclear and cause disagreement or awkwardness
Which of the following is a disadvantage of using a bank loan to start a business?
The bank may ask for security that it can take if repayments are missed
A business angel offers to invest 15,000 pounds in a new enterprise. What will the owner have to do in return?
Give the angel a share of the enterprise and its profits
An enterprise that is already trading wants to expand. Which of the following uses of capital is linked to expansion?
Opening additional premises and increasing production
Which of the following is a disadvantage of using crowdfunding to raise capital?
The business idea may be copied by others before it is launched
Which of the following is an advantage of using a bank loan to start a business?
The repayment amount is fixed, so it is easy to budget for
Which of the following is a possible disadvantage of using own savings to start a business?
There may be no savings left for emergencies
Which of the following is an advantage of using a loan from friends or family to start a business?
Repayments can often be flexible, with little or no interest
Why might a start-up owner choose a business angel instead of a bank loan?
The angel can offer advice based on business experience
Which of the following is a disadvantage of accepting investment from a business angel?
The owner has to give up some control over decisions
Which of the following is an advantage of using crowdfunding to raise capital?
No interest has to be paid on the money raised
What is the name for a business network that gathers local entrepreneurs together to share ideas, issues and solutions?
Chamber of Commerce
What is meant by a business angel?
An individual who provides finance for a business, usually in return for a share of its ownership
Which term describes an organisation set up to support a particular cause or group, which may offer free advice, training or funding to enterprises that meet its aims?
Charity
What is meant by a local council enterprise department?
A team that works to help businesses in its area, for example through grants, advice and recruitment support
What is the name for a qualified professional who advises a business on legal matters such as contracts and employment law?
Solicitor
What is meant by an accountant?
A qualified professional who keeps a business's financial records and prepares its statutory end of year accounts
What is meant by a finance provider?
A source of money for a business, such as a bank or a business angel
Which term describes a sum of money given to a business that does not have to be repaid?
Grant
Which source of support sets policies such as tax rates and also offers grants, mentors and training to enterprises?
The government
How does a business angel differ from a bank when providing finance to a start-up?
A business angel may take a share of the business
A start-up needs free advice about trading in its local area and details of small grants. Which source is best placed to help?
The local council enterprise department
Which is a limitation of using an accountant for support?
They charge fees that can be expensive for a small business
A limited company wants to check that a contract with a supplier is legally sound. Which source of support should it use?
A solicitor
Why might a new entrepreneur ask friends or family for advice?
Their advice is usually free and available immediately
Which is a limitation of relying on a family member for business advice?
They may not have the relevant business experience
What is an advantage of joining a Chamber of Commerce?
It helps members network with other local entrepreneurs
Why might government support not be suitable for every start-up?
The business must fit with the government's own agenda
Which is a limitation of getting support from a charity?
Charities are often limited in who they can support
Which is a limitation of using a bank to finance a start-up?
The amount and the loan period may be restricted
Which is an advantage of getting support from a charity?
It may include free or low cost training and financial help
A graphic designer runs a very specialised business and asks her local council enterprise department for support. Why might the help be less useful to her?
The team may not understand her niche market
Which is a limitation of joining a Chamber of Commerce?
Membership fees have to be paid
Which is a limitation of using a solicitor for support?
Their fees are high for a small business
A start-up needs money to expand and also wants advice on managing the extra costs. Which is an advantage of using a finance provider such as a bank?