Section 2

Question 1

What is LTD?

Answer 1

Private limited company

Question 2

What liability does LTD companies have?

Answer 2

Limited liability

• if the business is in a loss or survival crisis, the people’s personal life will not be affected by it.

Question 3

What are the advantages of an LTD company?

Answer 3

• limited liability
• an increase source of finance (money)
• more expertise (specialised people) available

Question 4

What are the disadvantages of an LTD?

Answer 4

• competitors can see your account (unlike partnership or sole trader)
• can’t sale shares to the general public
• greater legal constrains (stricter contracts with governments)

Question 5

Who controls the business on both LTD and PLC companies?

Answer 5

The board of directors

Question 6

What is an annual general meeting?

Answer 6

Where shareholders get to decide/vote on important decisions relating to the business.

• in PLC and LTD

Question 7

What should an LTD company do to change into a PLC company?

Answer 7

It has to change its certificate of trading and memorandum of association

Then re-submit to the registrar of companies

Question 8

What are the advantages of a PLC company?

Answer 8

• can employ specialists
• as firm is big - it’s easier to negotiate with suppliers
• can get more money by selling shares to the general public
• shares can be given to workers (to motivate them)

Question 9

What are the disadvantage of a PLC company?

Answer 9

• firm can be taken over (anyone with enough money can buy a 51% share and take over)
• accounts can be seen
• expensive to set up - register

Question 10

What is a memorandum of association?

Answer 10

Information about company

Information about the people involved in the business

Question 11

What is an article of association?

Answer 11

The rules for running the company

Contract

Question 12

To what must a PLC and LTD company must be registered to? How?

Answer 12

To the companies house

They need to send the memorandum of association (details) and the article of association (contract)

Question 13

What are minority shareholders?

Answer 13

Private individuals who own a very small percentage share of the business

Question 14

What are the major shareholders?

Answer 14

Someone or a firm owning a large percentage of shares in a business

Question 15

Once you have a separate legal identity, what liability do you have?

Answer 15

Limited liability

Question 16

Who is a director ?

Answer 16

Someone who looks after the business

Question 17

What is a chairman ?

Answer 17

Someone who is the boss of the director

Question 18

What makes shares increase in value (price)?

Answer 18

• when the economy is doing well
• when someone wants to take over by buying a lot of shares
• when the prospect (likelihood of something to happen) of business is good
• asset value of business has increased

Question 19

What is a franchise/ franchisor?

Answer 19

A firm or business who own let’s a franchisee copy their brand.

Question 20

What is a franchisee?

Answer 20

Someone that is using the brand name of the franchisor

Question 21

What does the franchisee owe to the franchisor ? - as it is using its business to make profit

Answer 21

Owes a big share of the profit the franchisee will make

Question 22

What are the advantages of a franchisee?

Answer 22

• trading under the name of a successful brand
• support is provided
• training is provided
• help with location of business

Question 23

What are the disadvantage of being a franchisee?

Answer 23

• give shares of profit to the franchiser (pay royalty)
• initial set up fee (expensive)
• bad reputation on franchisor will affect the franchisee’s business

Question 24

What is a royalty?

Answer 24

A payment for the franchisor from the franchisee based on how much profit it made

Question 25

What is the definition of franchise?

Answer 25

A marketing arrangement that allows another business to trade in using the same name and style of the existing business.

Question 26

What do you need to make sure as a franchisor?

Answer 26

• the franchisee’s business is at the correct location (urban place)
• franchisee is successful
• if the franchisee has skills
• no competition in the same market

Question 27

What does a franchisor need to know about a franchisee before the franchisee starts the business?

Answer 27

• trained well
• supports offer
• have skills
• agrees to conditions and restrictions (the agreement’s duration and how the business will be run)
• initial and ongoing costs (will the franchisee be able to afford it)

Question 28

What is a cooperative?

Answer 28

An organisation owned by a group of people that provides goods and services

Question 29

What are the cooperatives for?

Answer 29

To benefit the owners with money

Question 30

What is a good thing about a cooperative?

Answer 30

Every employee has a share of the profit (has a share in the company which is also knows as a PART OWNER)

This makes everyone motivated and working together

Makes the cooperative more successful

Question 31

What is a disadvantage of cooperatives?

Answer 31

Cooperatives find it difficult to grow due to LIMITED CAPITAL