Types of Businesses

Question 1

Four types of Ownership:

Answer 1

Sole Trader

Partnership

Private Limited Company

Public Limited Company

Question 2

Primary, Secondary and Tertiary Sector:

Answer 2

Primary Sector- concerned with the extraction of raw materials, for example farming.

Secondary Sector- concerned with transforming raw materials into finished goods (manufacturing) e.g. dressmaker.

Tertiary/ Service Sector- concerned with providing services such as retailing, transport and banking.

Question 3

Private and Public Sector:

Answer 3

Private Sector Organisations- owned, financed and run by a group of individuals

Public Sector Organisations- state owned or government organisations that are operated by the government at a national, regional or local level, they are financed from taxation e.g. NHS

Question 4

Unincorporated and Incorporated:

Answer 4

Incorporated- the business has a separate legal identity to its owners. They have been registered at Companies House and can own assets, owe money and enter contracts. (has limited liability)

Unincorporated- there is no distinction between the identity of the business and its owner so the owner has unlimited liability.

Question 5

Unlimited and Limited Liability:

Answer 5

Unlimited Liability- the owner is liable for all the business’ debts so will have to use personal finance and possessions to pay it off.

Limited Liability- owner only loses the amount of money they invested into the business, if it goes into debt.

Question 6

Sole Trader:

Answer 6

Owned and financed by one person e.g. hairdressers, plumber, electrician, builder.

Advantages:
Easy to set up
No legal formalities
Minimal start-up costs

Disadvantages:
Unlimited liability
Hard to raise finance
Pressure

Question 7

Partnership:

Answer 7

More than one owner e.g. accountant, doctors, solicitors, vet.

Advantages:
Owners share responsibility

Disadvantages:
Share profits
Unlimited liability

Question 8

Private Limited Company (Ltd.):

Answer 8

Run by a family/small group e.g. River Island, Specsavers, New Look

Advantages:
Limited liability
Reasonably private
More knowledge

Disadvantages:
Shares not sold on the stock exchange
Can be disagreements

Question 9

Public Limited Company:

Answer 9

Owned by shareholders e.g. Pizza Express, Selfridges

Advantages:
Shares are sold on the stock market
Limited liability
Easy to raise finance

Disadvantages:
Risk of losing control