Business Sector + Types Of Business (Crossover With Chapter 1)

Question 1

What’s a limited liability partnership

Answer 1

• Combine partnerships with legal companies
• a separate legal identity
• Now possible to have partnership advantages combined with limited liability (couldn’t get it before)
• now with limited liabilty, has to display accounts at Companies House like ltds

Question 2

What’s a private limited company

Answer 2

• owned by their shareholders
• They’re run by directors
• Limited liability (can only recover money from the existing assets of the business)
• Can lose any money they invested into the business
• Have to register with companies house

Question 3

Why might a ltd want to become a plc

Answer 3

-Shares cannot be offered to the general public to buy
=restricted finance
=struggles to expand

• Easy to raise capital through other finance sources (banks)
• Listed on the stock exchange????

Question 4

What’s “divorce of ownership and control”

Answer 4

• Associated with PLCs
• Shareholders own the company but do not control it

Few shareholders have a direct say in the daily running of a PLC

Specialist directors employed to have effective day to day control on shareholder’s behalf

• Ownership and control is separated this way
• However, a clash can take place between directors (controllers) and the shareholder wishes (owners)

Question 5

What does incorporated mean

Answer 5

The business existing in its own right

Question 6

What’s unincorporated mean

Answer 6

They do not exist separately from their owners (sole traders and partnerships have this)

Question 7

What’s liquidation

Answer 7

When a company has to stop trading because of financial problems

Question 8

Advantages of being an ltd

Answer 8

-Cannot be taken over as a business
= can sell out its shares to an investor

• Has no minimum share capital value to do anything
• Less complicated procedures of reporting to shareholders
• The directors can also be shareholders (great view and passion for the business)
• Limited liability
• Continuity

Question 9

What’s continuity mean?

Answer 9

The company doesn’t come to an end when the original owner dies as it is a separate legal identity

Question 10

Disadvantages of being an ltd

Answer 10

-Shares cannot be sold on the stock market
= have to go through private negotiation if they are to be sold
= no advertising to the public of the shares up for sale

• expensive to set up
• More difficult to run than a sole trader/partnership
• Legal responsibilities and job roles (hiring accountants and lawyers)

-Accounts published at Companies House available for anyone to see
=main financial details on show for competitors

Question 11

What’s a PLC

Answer 11

• Must have 2 shareholders
• Must have 2 directors
• Limited liability
• Incorporated
• A company able to sell its shares to the public (or atleast have the option to)

Question 12

Advantages of being a PLC

Answer 12

-Shares can be sold on the stock market
= generate more capital to expand and grow

• Continuity
• Seen as less risky by banks making it easier to borrow money

Question 13

Disadvantages of being a PLC

Answer 13

-Require a minimum of £50,000 share capital

-Can be taken over very easily with shares available to anyone to buy
=legally able to be taken over after an investor gains 51% of the shares

-Company accounts aren’t private
=at Companies House

-More complicated management structures to manage more people, communication and coordination

Question 14

What’s the public sector?

Answer 14

• Different objectives to private sectors businesses (ST, P, LTD, PLC)
• Not expected to make a profit
• provide a value-for-money service
• Expected to provide the highest quality of service possible
• Expected to keep a tight rein on finances so they don’t waste any funds they receive very limited