Business Activity and Enterprise
Where business begins: why businesses exist, what an entrepreneur risks and rewards, the aims a business sets, the main ways a business can be owned, and the stakeholders who have an interest in it.
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Free interactive practice at using the material, which is what the marks are for.
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Where business begins
A business exists to provide goods or services that meet the needs and wants of its customers, usually aiming to add value and make a profit. Starting one takes enterprise: an entrepreneur is a person who sets up and runs a business, taking a risk with their time and money in the hope of a reward. Every business sets aims and objectives, such as survival, profit or growth, to guide what it does. It must also be owned in some way: as a sole trader, a partnership or a company, and each has different features. A business affects many groups called stakeholders, from its employees and customers to the local community, and each of them wants something different from it. This module covers business activity, enterprise, aims, ownership, stakeholders and growth.
Business words
Learn what each of these means before you use it.
Sole trader against company
Two very different ways to own a business. The big difference is liability, meaning who is responsible for the debts.
How to choose an ownership type
When someone starts a business they take a risk hoping for a reward, and an early decision is how to own it. Rather than memorising each type, weigh three questions against each other: how simple is it to set up, who receives the profit, and what happens to the owner if the business falls into debt. That last question, called liability, matters most: with some types the owner risks everything they own, while with others they can lose only what they put in. Match what the owner wants, whether that is simplicity, keeping control or protection from debt, to the type that best provides it, and you can justify any choice you make.
Match the term to its feature
- a sole trader
- a partnership
- a company
- an entrepreneur
- one owner who keeps all the profit
- two or more owners who share the profit
- owned by shareholders with limited liability
- the person who takes the risk to start a business
Taking the risk
A person invests their savings to open a new cafe, hoping it will succeed but knowing it might fail. What best describes this person and what they are doing?
- an entrepreneur taking a risk in the hope of a reward
- a stakeholder who has no interest in the business
- a customer buying from the business
- an employee paid a wage
Business aims
Select the TWO aims a business might realistically set itself.
- To make a profit
- To grow and reach more customers
- To close down as quickly as possible
- To lose money every year on purpose
Types of ownership
There are three main types of business ownership: sole trader, partnership and company. A lesson has covered the sole trader and the partnership. Subtract to find how many of the three types are left.
Order starting a business
Put these steps of starting a new business in a sensible order.
- Spot a gap in the market or a good idea
- Plan the business and how it will work
- Choose a type of ownership
- Start trading and selling to customers
Complete the business facts
A person who sets up and runs a business, taking a risk for a reward, is an _____. A business with one owner who keeps all the profit is a _____. A business owned by shareholders, who have limited liability, is a _____. Any group with an interest in a business, such as its employees or customers, is a _____.
Match the stakeholder to its interest
- employees
- customers
- suppliers
- the local community
- secure jobs and fair pay
- good quality goods at a fair price
- regular orders and prompt payment
- local jobs and a clean environment
Spot the true business facts
Tap the TWO statements that are true.
- An entrepreneur takes a risk in the hope of a reward
- A company is owned by its shareholders
- A sole trader always has many owners
- Customers have no interest in a business
Advise the owner
Read each case and choose the best response, with a reason.
- Someone wants to start a small business alone, quickly and simply, and is happy to keep all the profit. Which ownership type fits best?
- An owner is worried about losing their home if the business fails. Which feature would protect them?
- A business decides to open shops in several new towns. What is this an example of?
Explain business and enterprise
A friend wants to start a business and asks what they need to understand first. Explain business activity, enterprise and how a business can be owned.
- Explain what business activity is and why businesses exist
- Explain what an entrepreneur is and the risk and reward involved
- Describe two types of business ownership and one difference between them
- Explain what a stakeholder is, with two examples
- Finish by explaining one aim a business might set itself