Types of Businesses

Question 1

What are the four types of businesses?

Answer 1

sole proprietorship
partnership
private limited company
public limited company

Question 2

Another name for sole proprietorship?

Answer 2

sole trader

Question 3

Who is a sole trader?

Answer 3

a person who has total ownership and responsibility for his/her own business.

Question 4

examples of sole traders?

Answer 4

plumbers. electricians, gardeners, photographers & hairdressers

Question 5

Characteristics of a sole proprietorship business?

Answer 5

1) It is owned and managed by one person (in most cases)

2) it is easy and inexpensive to form

3) He / She manages the business but may have the services of family or friends

4) it is usually financed by the owner

Question 6

The sale of alcohol requires a spirit license from the ?

Answer 6

local magistrate

Question 7

The sale of food items requires a license from the?

Answer 7

local food health authority

Question 8

The requirement of a special license to sell certain items, in Jamaica is called?

Answer 8

The Bureau of Standards

Question 9

Advantages of being a sole trader?

Answer 9

They receive all the profits earned by the business

Decisions can be made in a short period of time

Starting and operating of the business can be done easily

There is no need to disclose business affairs except to tax authorities or creditors when seeking loans. (secrecy)

Many persons find personal satisfaction working for themselves (independence)

Question 10

Give an example of a creditor

Answer 10

a financial institution

Question 11

Disadvantages of being a sole trader?

Answer 11

The owner may find it difficult in getting financial support if expansion of the business is necessary.

The owners may have to work long hours

The business may not continue if the owner dies

The owner may not be in a position to hire specialized task (lack of specialized staff)

Question 12

What is a partnership?

Answer 12

the association of 2 to 20 persons legally operating a business for the common goal of making a profit.

Question 13

Characteristics of a partnership?

Answer 13

the minimum is 2 and the maximum amount of persons is 2o members except in the case of banking where the maximum is 10 members

profits are shared equally or as stated in the partnership deed

capital is provided by the partners as agreed

the retirement or death of one partner may require the reorganization of the partnership

Question 14

When a number of persons want to form a partnership, a written agreement should be drawn up. This agreement is called…?

Answer 14

a Partnership Deed/Article of Partnership

Question 15

A partnership has __________ liability. (unlimited, limited)

Answer 15

unlimited

Question 16

What is the Partnership Deed/Article of Partnership?

Answer 16

This sets out in writing the terms of the partnership.

Question 17

In absence of a Partnership deed, what is enforced?

Answer 17

the Partnership Act

Question 18

Name 4 types of partners

Answer 18

General/Ordinary/Active
Sleeping, Dormant, Docile/Silent
Unlimited
Limited

Question 19

Who are General/Ordinary/Active Partners?

Answer 19

partners who are actively involved in the day-to-day operations of a business

Question 20

Who are Sleeping/Dormant/Docile/Silent Partners?

Answer 20

partners who invest money in the business but do not take an active role in it.

Question 21

Who are Unlimited Partners?

Answer 21

Partners who have unlimited liability status, meaning, this means that if the business becomes bankrupt they are not protected so they will lose their personal assets as well as what they have invested in the business.

Question 22

Who are limited partners?

Answer 22

Partners who are protected, meaning if the business goes bankrupt they will lose only what they have invested in the business.

Question 23

What are the benefits of being in a partnership?

Answer 23

• the work load is shared
• the risks are shared
• knowledge and skills are shared
• there is a greater access of finance

Question 24

What are the disadvantages of being in a partnership?

Answer 24

• decision making is slow
• you are responsible for any mistakes made under any other partner
  -there is unlimited liability in a partnership

Question 25

Define company

Answer 25

a group of companions who come together to set up a business

Question 26

What are the two types of companies?

Answer 26

private and public limited companies

Question 27

What is the main difference between private and public limited companies?

Answer 27

where they receive their finances

Question 28

Define public companies

Answer 28

companies whose shares are traded on a public stock exchange. They can trade shares without having to get permission from the board of directors

Question 29

Define private companies

Answer 29

companies that are owned by private shareholders and whose shares are not openly traded on a stock exchange.

Question 30

In a private limited company financial support comes from?

Answer 30

family members/ personal savings

Question 31

In a public limited company financial support comes from?

Answer 31

the general public/loans from financial institutions

Question 32

In which type of company is there limited liability and so Ltd is included in the company name?

Answer 32

private company

Question 33

how many shareholders are there in a private company

Answer 33

2-50

Question 34

how many shareholders are there in a public company

Answer 34

a minimum of seven

Question 35

which type of company is considered a legal entity? (an individual, company, or organization that has legal rights and obligations.)

Answer 35

Private

Question 36

advantages of having a private limited company

Answer 36

profits are retained by owners greater access to capital greater level of continuity original owners can stop outsiders from buying up their copmpany

Question 37

Disadvantages of having a private limited company

Answer 37

shares cannot be issued to members of the public liability shares are not easily transferred without the consent of the directors financial statements are audited by the registrar of the company decision-making can be slow having a smaller number of people from whom to draw funds may restrict growth

Question 38

advantages of having a public limited company

Answer 38

all share holders have limited liability greater access to capital shares are transferrable an incorporated business is easier to sell than an unincorporated one

Question 39

disadvantages of having a public limited company

Answer 39

Financial statements are audited and published the business may get too large causing diseconomies of scale decision making can be slow a huge amount of administration is needed to register the company and to produce annual reports detailed accounts must be kept

Question 40

advantages of having a sole trader business

Answer 40

you get all the profit from the business the business needs less capital financial independence

Question 41

disadvantages of having a sole trader business

Answer 41

hard to get loans you have to provide all the capital on your own if the business goes bankrupt you are responsible for all the losses

Question 42

Examples of public limited companies?

Answer 42

Grace Kennedy NCB Berger Paints JMMB Supreme Ventures

Question 43

Examples of private limited companies

Answer 43

plumber hair salon dental practice accountant restaurant

Question 44

What are the two legal documents needed to open a business?

Answer 44

Memorandum of association Articles of association

Question 45

What is the memorandum of association?

Answer 45

it defines the relationship of a limited liability company with its shareholders

Question 46

Four things included in a memorandum of association?

Answer 46

company's name physical address of the registered office names of shareholders distribution of shares

Question 47

What is the articles of association

Answer 47

it specifies the regulations for a company's operations and defines the company's purpose.

Question 48

What is stock exchange?

Answer 48

a marketplace where stocks and bonds are usually bought and sold

Question 49

How are bonds and corporate bonds usually traded?

Answer 49

bonds- over the counter corporate bonds- stock exchange

Question 50

Who are shareholders?

Answer 50

a person, company or institution that owns at least one share of a company's stock.