Different Types Of Business Ownership

Question 1

Sole trader is?

Answer 1

Business owned by one person

Question 2

Sole trader advantages

Answer 2

Low start up costs - trade immediately, register with tax authorities
Profits all go to you
No conflict between others

Question 3

Disadvantages of sole traders

Answer 3

Limited liability- bankruptcy, banks can take personal assets
Workload is high
Raising finance- banks see as risky

Question 4

Partnership is?

Answer 4

Business consisting of 2-20 people that have signed a deed outlining the rules and regulations for each partner

Question 5

Partnership advantages

Answer 5

More capital/raising finance - 20 people seen as less risky than sole traders
Financial affairs are private - only tax authorities
Specialisation

Question 6

Partnership disadvantages

Answer 6

Unlimited liability
Conflict between partners
Loss of autonomy- must consult partners
Loss of continuity- death could lead to dissolve

Question 7

Private limited company is?

Answer 7

Small group of family and friends, cannot be bought shares by the public, shareholders get dividends each year

Question 8

LTD advantages

Answer 8

Limited liability- only liable for their investment
Raising finance - seen as less risky
Specialisation

Question 9

LTD Disadvantages

Answer 9

Lack of privacy- submit financial affairs
Set up costs are high and time consuming- accountancy fees
Corp tax- based on company profits

Question 10

PLC is?

Answer 10

Largest type, shares can be bought on the stock exchange

Question 11

PLC advantages

Answer 11

Limited liability
Large capital- whole public can buy shares
Banks are willing to lend not seen as risky
Economies of scale - size, get better deal from suppliers, buy in bulk at lower price etc

Question 12

PLC disadvantages

Answer 12

Financial affairs made public- register of companies
Slow decision making - meetings
Expensive - accounts, solicitors
Threat of takeover - competitors can buy majority shares

Question 13

Limited companies are owned and managed by?

Answer 13

Owned by shareholders managed by board of directors

Question 14

Franchises are?

Answer 14

A business owner, franchisor, gives permission to a franchisee to set up a business using the business name and resources

Question 15

Franchisee advantages

Answer 15

Well known brand name
Defined territory
Assess to finance - banks willing to lend

Question 16

Franchisee disadvantages

Answer 16

Loss of control- must get approval for everything

Interdependency- negative image in when place effects the whole brand

Less individuality- all shops organised and decorated the same

Question 17

Franchisor advantages

Answer 17

Growth and expansion
Profits - pays royalties
Management - doesn’t have to be involved day to day

Question 18

Franchisor disadvantages

Answer 18

Loss of control- little day to day input
Interdependency
Diseconomies of scale - grow to quickly leading to communication, coordination and motivation problems

Question 19

Private v public - ownership

Answer 19

Private individuals
Country or state

Question 20

Private v public - Purpose/aim

Answer 20

Provide a service
Make profit

Question 21

Private v public - Control

Answer 21

Private owners or bod
Central gov or local authorities

Question 22

Private v public - Finance/capital

Answer 22

Raised by owners or bank loans
Taxes from treasury by gov

Question 23

Private v public - Profits

Answer 23

To owners or invested
Treasury or invested