AOS 1 UNIT 3 Business foundations

Question 1

Limited Liability

Answer 1

When shareholders are only liable to the extent of their shareholders. They are not personally responsible for business debts

Question 2

Unlimited Liability

Answer 2

Personal legal responsibility a business owner has for an incorporated business debts - all of risks

Question 3

Incorporation

Answer 3

-Makes a owner and business separate
-Business its in own legal entity
- Shareholders/owners are not liable for occurrences
- Known as company

Question 4

Board of directors

Answer 4

Run the business in behalf of shareholders

Question 5

Identify at least 3 advantages for being a sole trader

Answer 5

Advantages-
- owner has full control and decision making power
-Low risk of disputes as only one person in control
-Simple and inexpensive to set up
-Don’t have to set up TFN

Question 6

Identify at least 3 disadvantages to a sole trader

Answer 6

• Unlimited liability
• Knowledge and power is limited to the owner(may not have expertise in certain areas)
• Life of the business ends when owner dies
• Burdan of managing entire business
• More difficult to gain finance

Question 7

Sole trader def

Answer 7

A sole trader is an individual who owns the
business, and is the sole person legally
responsible for all aspects of the business.

Question 8

Partnership def

Answer 8

A partnership is a business structure that
involves 2 to 20 individuals who own a
business together

Question 9

List at least 3 advantages of a partnership

Answer 9

• Financial and legal risks shared
• Shared work load
• Easier to raise capital
• shared ideas- greater level of expertise between partners

Question 10

List Atleast 3 disadvantages

Answer 10

unlimited liability- personal assets can be at risk
- need to share the profits amongst everyone
- more legal requirements

Question 11

Private limited company def

Answer 11

An incorporated
business that is owned by
shareholders and not
listed on the stock

Question 12

list atleast 3 PLC advantages

Answer 12

-limited liability
- pay company tax rate
- life of the company can live longer than directors
- can be easier to attract more capital

Question 13

list at least 3 PLC disadvantages

Answer 13

• more complex and expensive to establish
• more reporting requirements to government
• shares can be traded freely

Question 14

Public listed company DEF

Answer 14

An incorporated
business that is owned
by shareholders, run by
directors, and listed on
the stock exchange.

Question 15

list atleast 3 Public listed company advantages

Answer 15

-Limited liability- each shareholder can only be limited to how much they invested
-greater access to expertise and ideas as more people involved
- No permission is needed to trade + share sells
- pay company tax rate
-Longer than the life of the directors

Question 16

List atleast 3 disadvantages of public listed company

Answer 16

• conflicts can arise between shared decisions amongst directors
  -greater time to set up- complex business structure
• Possible loss of capital

Question 17

Government business enterprise def

Answer 17

A business that is owned
by the government, but
aims to act under general
business principles and
make a profit.

Question 18

list atleast 3 Government business enterprise advantages

Answer 18

delivers goods + services to help the community and its needs
- rely on gov for initial investments
- provides healthy competition to private sectors
- may invest in areas private companies may hesitate to invest in.