1 - Business Ownership

Question 1

What Are The 4 Different Business Forms?

Answer 1

~ Sole traders.

~ Private and public limited companies.

~ Private and public sector organisations.

~ Non-profit organisations such as charities and mutuals.

Question 2

What Is A Sole Trader?

Answer 2

An individual who runs their own business.

Question 3

Describe Sole Traders
(4 Points)

Answer 3

~ Registered as self-employed with HMRC.

~ Legally required to keep a record of all income and expenses and the end of the tax year to fill in a self assessment tax return for HMRC.

~ Profits made are classed as income and are therefore taxable through income tax.

~ Has unlimited liability.

Question 4

What Is The Meaning Of Unlimited Liability?
(2 Points)

Answer 4

~ Personally responsible for all debts run up by the business.

~ All assets may be used to pay off any debts that they may incur and are unable to pay.

Question 5

What Are The Benefits Of Being A Sole Trader?
(5 Points)

Answer 5

~ Cheap and easy to set up.

~ All profits go to the owner.

~ Complete control in decision making.

~ Financial records remain private.

~ Motivation would be high.

Question 6

What Are The Drawbacks Of Being A Sole Trader?
(4 Points)

Answer 6

~ Unlimited liability.

~ Limited capital for investment.

~ Little specialist skills.

~ Difficult to find cover when unwell.

Question 7

Describe Limited Companies
(6 Points)

Answer 7

~ They exist in their own right.

~ Owners and the company are separate legal entities.

~ The companies finance are separate from the owners personal finances.

~ Shareholders are the owners.

~ Have limited liability.

~ Only lose the money that they have invested in the business in the form of shares.

Question 8

What Is Limited Liability?

Answer 8

Not responsible for the companies debts.

Question 9

Describe Private Limited Companies
(4 Points)

Answer 9

~ LTD.

~ Owned by shareholders who are known to the company.

~ Can only sell shares to other shareholders.

~ Cannot sell shares openly on a stock exchange.

Question 10

What Are The Benefits Of LTDs?
(5 Points)

Answer 10

~ Limited liability.

~ Separate legal entity.

~ More flexible than a PLC.

~ Financial records remain relatively private.

~ More capital can be raised through the sales of shares.

Question 11

What Are The Drawbacks Of LTDs?
(3 Points)

Answer 11

~ More complex to set up due to increased legal requirements.

~ Some loss of control as shareholders have voting rights.

~ Unable to sell shares to the public.

Question 12

Describe Public Limited Companies
(4 Points)

Answer 12

~ PLC.

~ Shares can be sold to the public via the stock exchange.

~ Open to more public scrutiny.

~ Risk of hostile takeovers, if anyone can obtain 51% of shares in the company.

Question 13

What Are The Benefits Of PLCs?
(4 Points)

Answer 13

~ Limited liability.

~ Separate legal entity.

~ Financial records remain relatively private.

~ More capital can be raised through the sales of shares.

Question 14

What Are The Drawbacks Of PLCs?
(4 Points)

Answer 14

~ Lack of privacy as financial performance is available for all to view.

~ More complex to set up due to increased legal requirements and ongoing administrative costs.

~ Some loss of control as shareholders have voting rights.

~ Risk of hostile takeover.

Question 15

What Is The Private Sector & Give Examples?
(2 Points)

Answer 15

~ Sector of the economy that os owned and controlled by individuals or groups of individuals rather than by the government.

~ Sole traders, PLC and LTD.

Question 16

What Is The Public Sector & Give Examples?
(2 Points)

Answer 16

~ Sector of the economy that is owned and controlled by the government rather than individuals or groups of individuals.

~ State education, NHS and public services.

Question 17

Describe Not-Profit Organisations
(3 Points)

Answer 17

~ Businesses which don’t have an objective of profit.

~ They may have an objective to do good for society and any surplus made is put back into achieving that goal.

~ Examples -> Social enterprises, charities.