Structures

Question 1

What is a private sector business ?

Answer 1

The part of the UK economy that is operated by businesses owned by shareholders or private individuals.

Question 2

What is a public sector business ?

Answer 2

Made up of organisations that are owned and run by the government funded through tax payers.

Question 3

What is limited liability ?

Answer 3

The personal possessions of the owner are not at risk of being seized if the business cannot pay debts.

Question 4

What is unlimited liability ?

Answer 4

The personal possessions of owners are at risk of being seized if the business can’t pay debts.

Question 5

Describe features of the public sector.

Answer 5

1. Provides goods/services private sector isn’t willing to provide.
2. Provides universal services to all UK residents.
3. Employment to those working in public sector organisations.
4. Helps to fund new businesses which contribute to the economy.
5. Funded through taxation.
6. Services are free at the point of use.

Question 6

Describe private sector features.

Answer 6

1. Owned by private individuals.
2. Main aims are to earn profit.
3. Profit benefits owners, shareholders and investors.
4. Financed by private money from shareholders and bank loans.

Question 7

What are the aims of a private sector business ?

Answer 7

1. Survival
2. Sales/Profit maximisation
3. Market share
4. Cost efficiency
5. Employee welfare
6. Customer satisfaction
7. Social objectives/ethics
8. Increased shareholder value

Question 8

What are the aims of a public sector business ?

Answer 8

1. Non-excludability e.g. bus pass for over 60’s
2. Non-rivalry
3. Merit goods - offered based on how deserving it is of public finance
4. Provide jobs
5. Reduce crime
6. Increase health care and well being
7. Improve quality of education/training

Question 9

What are the aims of a start-up business ?

Answer 9

1. Breaking even
2. Raising awareness of the business
3. Establish business in a competitive market
4. Brand image
5. To achieve a certain market share

Question 10

What are unincorporated businesses ?

Answer 10

In law there is no difference. Between the owners and the business meaning that any legal action is effectively taken against the owners.

Question 11

What are incorporated businesses ?

Answer 11

A separate legal entity meaning in law there is a difference between the owners and the business meaning that legal action can be taken against the business.

Question 12

What is a sole trader ?

Answer 12

A business owned and operated by one person e.g. plumbers.

Question 13

Advantages of sole traders.

Answer 13

1. Few legal restrictions when setting up - quick and easy
2. Owner has complete control over the business
3. Owner has close contact with customers
4. Incentives to work hard - keep all profit
5. Owner can choose holidays, pay, breaks etc

Question 14

Disadvantages of sole traders.

Answer 14

1. Nobody to discuss matters with
2. Has unlimited liability
3. Hard to raise finance
4. Likely to remain small
5. Lack of specialist skills due to size
6. Lack of continuity in event of death, sickness, holiday

Question 15

What is a partnership ?

Answer 15

A group or association of between 2 and 20 people who agree to own and run a business together.