Business structure

Question 1

What are the different structures of businesses

Answer 1

Sole traders, Private and public limited companies, public and private sector organisations and non profits

Question 2

Define the private sector

Answer 2

The sector of the economy that is owned and controlled by individuals or groups of individuals rather than the government

Question 3

Which business structures fit into the private sector

Answer 3

Sole traders, private limited companies and public limited companies

Question 4

Define the public sector

Answer 4

The sector of the economy that is owned and controlled by the government rather individuals or groups of individuals

Question 5

Which three business structures fit into the public sector

Answer 5

State education, national health service and services like the police and army

Question 6

What are the three business objectives

Answer 6

Profit, growth and survival

Question 7

What are the objectives of the public sector

Answer 7

Provide services to society that are essential, would not be provided by the private sector and can not be easily charged for or sold profitably but benefit society like street lighting

Question 8

What is a sole trader

Answer 8

An individual who owns and runs their own business, they are legally required to keep a record of their income and expenses and must file their taxes

Question 9

What liability does a sole trader have

Answer 9

Unlimited liability

Question 10

What are the benefits to becoming a sole trader

Answer 10

Cheap and easy to set up, all profits go to you, autonomy in decision making, financial records stay private, motivation is high (business and person are the same)

Question 11

What are the disadvantages of becoming a sole trader

Answer 11

Unlimited liability, limited capital for investment, little specialist skills, difficult to find cover when ill

Question 12

What is a partnership

Answer 12

Where two or more people share the costs, risks and responsibilities of being in business together

Question 13

What are sleeping partners

Answer 13

Partners who invest in but do not manage the business

Question 14

What are the benefits of partnerships

Answer 14

Risks, costs and responsibility is shared, more scope for specialist skills, simple and flexible, financial records remain private, more capital can be raised

Question 15

What are the disadvantages of partnerships

Answer 15

Unlimited liability, arguments in decision making, if a partner dies, resigns or goes bankrupt the partnership is dissolved, trust is crucial

Question 16

What are limited companies

Answer 16

The owners and the company are separate legal identities so finances are kept separate, the owners are shareholders who have limited liability and are not responsible for debts, they can only loose their shares

Question 17

Describe incorporation

Answer 17

Companies send off various forms including a memorandum of association, articles of association, form 10 and form 12

Question 18

What are the features of private limited companies

Answer 18

Have Ltd. after their name, owned by shareholders but only family and friends, can only sell shares to shareholders (not on the stock exchange)

Question 19

What are the features of public limited companies

Answer 19

Have Plc. after their name, shares can be sold to the public via a stock exchange, open to public scrutiny and risk of hostile takeovers

Question 20

What are the advantages of Private limited companies

Answer 20

Limited liability, separate legal identity, more flexible than a PLC, financial records are relatively private, capital raised through selling shares

Question 21

What are the disadvantages of Private limited companies

Answer 21

More complex to set up due to increased legal requirements, some loss of control, unable to sell shares to the public

Question 22

What are the advantages of Public limited companies

Answer 22

Limited liability, separate legal identity, perceived status, more capital through selling shares

Question 23

What are the disadvantages of Public limited companies

Answer 23

Lack of privacy because financial record are open to the public, harder to set up due to legal requirements and ongoing admin costs, loss of control and risk of hostile takeovers

Question 24

What are the factors affecting the choice of legal structure

Answer 24

Ability and need to raise finance, nature of the business, personal preference, type of liability and size of the business

Question 25

What is a social enterprise

Answer 25

A business with primary social objectives whose surpluses are principally reinvested for that purpose in the business or community, rather than being driven by the need to maximise profit for shareholders and owners

Question 26

What are charities

Answer 26

Organisations with an aim to support a specific cause or benefit for the well being of society, organisations have to register to gain charitable status and are treated differently in terms of taxes

Question 27

What are societies

Answer 27

Organisations, formal or informal, made up of groups of people with a common interest

Question 28

What are cooperatives

Answer 28

Organisations that operate for the wellbeing of their members, members can be customers, employees or suppliers/producers