form of businesses

Question 1

what is an unincorporated business?

Answer 1

• the owner is the business - no legal differences
• unlimited liability
• most operate as sole traders

Question 2

what is an incorporated business?

Answer 2

• legal differences between the business and the owners
• limited liability
• operate as private limited companies

Question 3

what is unlimited liability?

Answer 3

means that the finances of the business are treated as inseparable from the finances

• the owner must pay all debts ( may mean selling house personal assets)
• can be made personally bankrupt
• sole traders and partnerships

Question 4

what is limited liability?

Answer 4

• shareholders can only lose the value of their investment

- does not protect you against wrongful or fraudulent trading

Question 5

what is a sole trader?

Answer 5

• is an individual who owns and operates his or her own business
• unlimited liability

Question 6

Benefits of operating as a sole trader

Answer 6

• quick and easy to set up
• simple to run, the owner has complete control over decision making
• minimal paperwork
• easy to close/ shutdown
• complete confidentiality can be maintained as accounts arent published

Question 7

Drawbacks of operating as a sole trader

Answer 7

• limited sources of finance
• longer hours to work
  personal assets at risk- unlimited liability
• can pay a higher tax rate than a company

Question 8

what is a partnership?

Answer 8

• unlimited liability

- exists when two or more people start a business

Question 9

Benefits of operating as a partnership

Answer 9

• quite simple
• more expertise and efforts of more than one owner
• provide specialist skills
• greater potential to raise finance
• share responsibility

Question 10

Drawbacks of operating as a partnership

Answer 10

• unlimited liability
• poor decision by one partner damages the interest of the other partners
• complicated to sell or close
• disagreements in partners

Question 11

what is a company?

Answer 11

is a legal entity, the owners of a company are shareholders

Question 12

what is a limited company?

Answer 12

y

Question 13

benefits of operating as a limited company

Answer 13

• limited liability - protects the shareholders
• easier to raise finance - shares
• a stable form of structure - business continues to exist even when shareholders change

Question 14

disadvantages of operating as a limited company

Answer 14

• grater admin costs
• public disclosure of company information
• directors legal duties

Question 15

what is a public limited company?

Answer 15

• more specialist type of limited company

- shares can be quoted and traded on a public

Question 16

what are a public sector company and examples

Answer 16

a small number of companies who are controlled by the government e.g. network rail

Question 17

what is a public sector organisation?

Answer 17

• provide goods and services which are owned and operated by public bodies
• funded by the government
• NHS

Question 18

what is a social enterprise?

Answer 18

• not for profit organisation
• trade in order to benefit the community
• social aims
  e. g. community development trusts, housing association

Question 19

what is franchising?

Answer 19

the franchisor grants a licence (franchise) to another business (franchisee) to allow it to trade using the brand/ business format

Question 20

advantages of operating as a franchise

Answer 20

• tested and developed format and brand
• advice support, training
• easier to raise finance
• still your own business
• no industry expertise is required
• lower risk method entry + lower failure rate

Question 21

disadvantages of operating as a franchise

Answer 21

• not cheap, initial fees, royalties
• restrictions on actions, including selling
• the percentage of revenue expected by the franchisor

Question 22

advantages for franchisor (person)

Answer 22

• classic growth strategy for a proven service business format
• rapid geographical growth for a minimum investment
• still have the option to open souls branches

Question 23

what is a lifestyle business?

Answer 23

• used to describe a business that generates only a living for the owner
• business objectives tend to be less important

Question 24

what is an online business?

Answer 24

lower costs, and high potential revenue with worldwide available