chapter 4

Question 1

what are the types of business organizations

Answer 1

1. sole trader
   2.partnership
   3.private limited company
   public limited company

Question 2

what are the advantages of being a sole trader

Answer 2

1. full control over decision making->no conflict,faster decision making process
   2.owner keeps all profit->motivated to invest more
   3.few legal requirments ->fast to set up

Question 3

disadvantages of being a sole trader

Answer 3

1. no one to share risk
   2.limited capital->only one person is investing, less opportunities to expand
   3.unlimited liability
   4.no continuity
   5.no shared responsibility

Question 4

define a sole trader

Answer 4

business owned by one person

Question 5

define a partnership

Answer 5

business owned by two or more people

Question 6

advantages of having a partnership

Answer 6

1.more capital than sole trader
2.shared responsibility
3.shared risk

Question 7

disadvantages of having a partnership

Answer 7

1.longer decision making process
2.conflicts may arise->can be solved with having a deed of partnership
3.unlimited liability
4.no continuity

Question 8

define a private limited company

Answer 8

sell shares to friends and family

Question 9

advantages of having a private limited company

Answer 9

1.larger capital
2.more control than public limited company
3.limited liability
4.continuity

Question 10

disadvantages of having a public limited company

Answer 10

1.original owner might lose control

Question 11

define a public limited company

Answer 11

sell shares to general public

Question 12

what is an incorporated business

Answer 12

companies that have separate legal status from their owners
detached accountability->limited liability, continuity

Question 13

what is an unincorporated business

Answer 13

company that has one legal status
no detached accountability->unlimited liability, no continuity

Question 14

problems of ownership in public limited company and how to solve it

Answer 14

due to the presence of thousands of shareholders->divorce between ownership and control.
solved by having an annual general meeting where shareholders vote for board of directors

Question 15

define franchising

Answer 15

use of brand names, promotional logos, and trading methods

Question 16

advantages as a franchisor

Answer 16

1.franchisee buys license
2.faster expansion
3.franchisee responsible for management

Question 17

disadvantages as a franchisor

Answer 17

1.if one branch is managed poorly it could lead to bad reputation for whole business
2.franchisee keeps profit

Question 18

advantages as a franchisee

Answer 18

1.chances of business failure are lower
2.franchisor pays for advertising
3.fewer decisions
4.banks more willing to lend to franchisees

Question 19

disadvantages as a franchisee

Answer 19

1.less independence
2.license fee paid to franchisor
3.unable to make decisions to suit local area

Question 20

define joint ventures

Answer 20

two or more businesses agreeing to start a new project together

Question 21

advantages of joint ventures

Answer 21

1.share risks
2.share costs

Question 22

disadvantages of joint ventures

Answer 22

1.disagreements
2.sharing profit