Why start a business?

  • Challenge: Some people will become restless working for someone else, want more of a challenge
  • Profit:  Setting up the business offers the chance of earning profits
  • New Ideas/Inventions:
  • Circumstances: People can be forced to set up their business due to unforeseeable circumstances e.g A redundant worker with a sum of money 

Problems in setting up a business:

  • Right Product: getting the right product that will satisfy the needs for the customer fully e.g. Value for money
  • Cash Flow: new starts ups often fail because cash flow issues i.e. run out of cash 
  • Premises: finding the right location
  • Legal Requirement: such as complying with planning laws, registering for tax and setting up the business legally.
  • Start-Up Finance:  difficult to convince investors to risk their money on your new idea
  • Distribution: getting the product into the hands of the consumers. E.g. For a retail product, retailers often will be reluctant to waste valuable shelf space for an unknown product. 
  • Competition: competing with long establishes brands (consumer loyalty), many large businesses benefit from economies of scale and hence can produce and sell their products cheaply.
  • Staff: finding the right staff with qualifications and experience 


Ownership Structures

  • Sole Trader
  • Partnership
  • Private Limited Company
  • Co-operative
  • Public Limited Company

Sole Trader

  • Both owns and runs the business
  • No formalities
  • Doesn’t need to share control or profits
  • Details are confidential
  • Unlimited Liability


  • 2-20 people involves in the business
  • Share ownership, Profits and decision making
  • Rights and duties are set out in legal document called “Partnership Deed/Agreement”
  • Unlimited Liability
  • Share Profits
  • Disagreements can arise

Private Limited Company

  • Limited Liability
  • 1-149 Shareholders, who elects the Board of Directors
  • Governed by Companies Act 2014
  • LTD’s have access to more capital by the issuance of shares
  • Control/Profits are shared
  • Details of business are public (annual profits and balance sheets)
  • Lots of Regulation ‘redtape”


  • Owned by members/shareholders
  • Shared profits and control
  • Must share a common bond e.g. a firm’s workers, suppliers or customers, people living within a certain area 

Public Limited Company

  • Offer Shares to the general public, can have any number of shareholders
  • A lot of regulations. Governed by more regulations than even a private limited company
  • Complex and costly to set-up