Sole Traders, Partnerships, Social Enterprises and Franchises

Question 1

Sole trader:

Answer 1

The most common form of business organisation. It is a business owned and operated by just one person.

Question 2

Advantages of sole trader:

Answer 2

• the owner keeps all the profit
• they are independent - owner has complete control
• it is simple to set up with no legal requirements
• flexibility - for example, can adapt to change quickly
• can offer a personal service because they are small
• may qualify for government help

Question 3

Disadvantages of a sole trader:

Answer 3

• have unlimited liability
• may struggle to raise finance - considered too risky by those that lend money
• independence may be too much of a responsibility
• long hours and very hard work
• usually too small to exploit economies of scale
  No continuity - the business dies with the owner

Question 4

A partnership:

Answer 4

Business owned by between 2 and 20 people. Partners may produce a deed of partnership.

Question 5

Deed of partnership:

Answer 5

Legal document that states the formal right of partners.

Question 6

Advantages of partnership:

Answer 6

• easy to set up and run-no legal formalities
• partners can specialise in their area of expertise
• the job of running a business is shared
• more capital can be raised with more owners
• financial information is not published

Question 7

Disadvantages of a partnership:

Answer 7

• partners have unlimited liability
• profit has to be shared
• partners may disagree and fall out
• any partners’ decision is legally binding on all
• partnerships still tend to be small

Question 8

Limited partnership:

Answer 8

Where some partners contribute capital and enjoy a share of the profit but do not take part in running the business. Also called a sleeping partner.

Question 9

Social enterprises:

Answer 9

Businesses which have important objectives other than making profit. They aim to support the wider community.

Question 10

Cooperatives:

Answer 10

A group of people who I agree to work together and pool their money together.

Question 11

Consumer or retail cooperatives:

Answer 11

Owned by their members. Profit made is given to members.

Question 12

Worker cooperatives:

Answer 12

Businesses in which their employees share ownership.

Question 13

Charities:

Answer 13

Organisations that give money, goods or help to people who are poor, sick or in need. (Charities rely on donations)