1.4 types of business organization

Question 1

Sole Trader/Sole Proprietorship

Answer 1

A business organization owned and controlled by one person.

Question 2

advantages of sole trader

Answer 2

• easy to set up: les legal and capital
• full control of decisions
• own work hours
• receive all the profit
• secretive: dont need to share info
• customer contact

Question 3

disadvantages of sole trader

Answer 3

• no one to discuss problem w
• unlimited liability/unincooprated
• less finance
• banks wont give loan
• remains small less capital
• no economy of scale
• no continuity
• all work alone

Question 4

who should set up sole trader

Answer 4

• new business
• don’t need much capital for business
• dealing w public

Question 5

Partnerships

Answer 5

legal agreement between two or more (usually, up to twenty)people to own, finance and run a business jointly and to share all profits.

Question 6

partnership agreement

Answer 6

-written and legal agreement betweeen business partners
contains:
-amount of capital
-tasks
-profit sharing
-how long 
-absence retirement and shit

Question 7

advantages of partnership

Answer 7

• more capital=expansion
• shared responsibility
• shared profit= motivation
• new skills and ideas
• easy to set up less legality

Question 8

disadvantages of a partnership

Answer 8

• -unlimited liablity/unincooprated
• disagreement
• lack of capital
• no continuity

Question 9

who should run a partnership

Answer 9

• run a business but avoid legalities
• when law only allows partnership
• wel known partners want to run a business

Question 10

private limited company

Answer 10

business owned by shareholders but can not sell shares to public

Question 11

advantages of private limited

Answer 11

-shares can be spend to large number= expansion cuz capital
-limited lability/incooprated
-

Question 12

disadvantage of private limited

Answer 12

• legal matters
• –article of association: rules under which the company will be managed
• –memorandum of association: imp decision of company and director
• shares can not be transferred
• less secret
• can only sell to known people

Question 13

who is private limited for

Answer 13

• family or partnership where they wanted to expand
• -wanted more capital
• spread risk

Question 14

public limited company

Answer 14

owned by shareholders but they can sell shares to public and are tradeable

Question 15

advantages of private limited company

Answer 15

• limited liability/ incorporated
• very large capitals
• no restriction to buying and selling
• company has high status

Question 16

disadvantages of public limited company

Answer 16

• leagl formalities
• more regulation to protect interest of shareholder
• selling of shares is expensive
• may loose control to shrareholders
• exp to hold agm meetings

Question 17

annual general meeting

Answer 17

is a legal requirement for all companies. shareholders may attend and vote on who they want to be on the board of director for coming year

Question 18

Franchises

Answer 18

owner of a business grants a licence to another person or business to use their business idea

Question 19

advantages of franchising to franchisor

Answer 19

• Rapid, low cost method of business expansion
• Gets and income from franchisee in the form of franchise fees and royalties
• Franchisee will better understand the local tastes and so can advertise and sell appropriately
• Can access ideas and suggestions from franchisee
• Franchisee will run the operations
• all products must be obtained from them

Question 20

disadvantages of franchising to franchisor

Answer 20

• Profits from the franchise needs to be shared with the franchisee
• Loss of control over running of business
• If one franchise fails, it can affect the reputation of the entire brand
• Franchisee may not be as skilled
• Need to supply raw material/product and provide support and training

Question 21

advantages of franchising to franchisee

Answer 21

• An established brand and trademark, so chance of business failing is low
• pay for advertising
• Franchisor will give technical and managerial support
• Franchisor will supply the raw materials/products
• fewer decisions to make
• get loans
• training is paid for

Question 22

disadvantages of franchising to franchisee

Answer 22

• Cost of setting up business
• No full control over business- need to strictly follow franchisor’s standards and rules
• Profits have to be shared with franchisor
• Need to pay franchisor franchise fees and royalties
• Need to advertise and promote the business in the region themselves

Question 23

Joint Ventures

Answer 23

Joint venture is an agreement between two or more businesses to work together on a project

Question 24

advantages of joint venture

Answer 24

-Reduces risks
-cuts costs
-different expertise
-The market potential for all the businesses in the joint venture is increased
Market and product knowledge can be shared to the benefit of the businesses

Question 25

disadvantages of a join venture

Answer 25

-Any mistakes made will reflect on all parties in the joint venture, which may damage their reputations -disagreement -The decision-making process may be ineffective due to different business culture or different styles of leadership shared profit

Question 26

public cooperation

Answer 26

business in the public sector owned and controlled by the government appoint a board of director that manages business

Question 27

aims of public cooperation

Answer 27

- to keep prices low so everybody can afford the service. - to keep people employed. - to offer a service to the public everywhere.

Question 28

advantages of public cooperation

Answer 28

- essential control over imp industry - natural monopolies - nationalize to stop from failing - non profitable imp business

Question 29

disadvantages of public cooperation

Answer 29

- no share holder for higher profit - subsides lead to inefficiency - ne close competition - can use for political reasons - low motivation