1.2: Type Of Business Entities

Question 1

What is the public sector?

Answer 1

The public sector is controlled by the government and provides social benefits.

Question 2

What are examples of services provided by the public sector?

Answer 2

Examples include housing and healthcare services.

Question 3

What is the private sector?

Answer 3

The private sector is owned and controlled by individuals or groups of individuals.

Question 4

What are two types of business organizations in the private sector?

Answer 4

Sole trader and partnership.

Question 5

What is a sole trader?

Answer 5

A sole trader is a business organization owned and controlled by one person.

Question 6

What are the advantages of being a sole trader?

Answer 6

Advantages include easy setup, complete control, receiving all profits, and choosing work patterns.

Question 7

What are the disadvantages of being a sole trader?

Answer 7

Disadvantages include unlimited liabilities, inability to specialize, lack of capital, and intense competition.

Question 8

What is a partnership?

Answer 8

A partnership is a legal agreement between two or more people with shared capital investment and responsibilities.

Question 9

What are the advantages of a partnership?

Answer 9

Advantages include specialization in different areas, shared decision making, more capital investment, and greater privacy.

Question 10

What are the disadvantages of partnerships?

Answer 10

Unlimited liability
Conflict over profits
Disagreement between partners

Question 11

What are Privately Held Companies?

Answer 11

A business owned by individuals, family members, etc. its shares are not sold to the general public.

Question 12

What are the advantages of Privately Held Companies?

Answer 12

• Better control
• Continuity
• Greater privacy than publicly held companies
• Limited liability

Question 13

What are the disadvantages of Privately Held Companies?

Answer 13

• Can only sell shares to family, friends, or employees
• More expensive to operate
• Vulnerable to takeover by larger companies

Question 14

What are Publicly Held Companies?

Answer 14

A business whose shares are sold to the general public

Question 15

What are the Advantages of Publicly Held Companies?

Answer 15

• Can raise additional finance through share issues
• Easier to obtain bank loans and mortgages
• Limited liability
• Benefits from economies of scale
• Continuity

Question 16

What are the Disadvantages of Publicly Held Companies?

Answer 16

• Lack of privacy
• High administrative costs and complexity
• Vulnerable to takeovers
• Can suffer from diseconomies of scale

Question 17

What is a For-Profit Social Companies?

Answer 17

A business which uses profit to support a cause while aiming to make a profit.

Question 18

What are the key characteristics of Social Enterprises?

Answer 18

• Address social or environmental issues
• Focus on achieving social objectives
• Require financial support and skilled human resources
• Include charities, cooperatives, and NGOs
• Aim to create social benefits

Question 19

What is the Triple Bottom Line?

Answer 19

• Economic: Earn profit to fund activities and growth
• Social: Provide social benefits to local communities
• Environmental: Protect the natural environment

Question 20

What are the key characteristics For Profit Social Companies in the Private Sector?

Answer 20

• Revenue-generating organizations with a focus on social goals
• Use ethical practices to achieve social objectives
• Earn revenue in socially responsible ways to benefit society or the environment

Question 21

What are the key characteristics of For Profit Social Companies in the Public Sector?

Answer 21

• Government-owned or controlled businesses
• Generate profit to benefit society
• Profits are used for public benefit

Question 22

What are the advantages of For Profit Social Companies in the Public Sector?

Answer 22

• Can finance projects through profits by charging fees
• Helps reduce debt and tax burden
• Creates secure jobs and promotes economic development

Question 23

What are the disadvantages of a For Profit Social Companies in the public sector?

Answer 23

• Expensive to operate (high setup and running costs)
• Difficult to attract private sector investment
• Balancing profits and social goals can be difficult

Question 24

What is a Public Private Partnership?

Answer 24

A long term agreement where the private sector helps fund, manage and operate public services or projects, etc with the government.

Question 25

What is a Cooperative?

Answer 25

For profit social enterprises owned and managed by members.

Question 26

What are key features of a Cooperation?

Answer 26

• Provide services and share profits among members.
• Typically registered as limited liability organizations.
• Members have equal voting rights and a democratic culture.
• Board directors make long-term decisions, while all members contribute.

Question 27

What are the advantages of a Cooperation?

Answer 27

• Easy and affordable to set up
• Serve a social purpose and contribute to taxes.
• Likely to succeed due to member involvement.
• No shareholder pressure.

Question 28

What are the disadvantages of a Cooperation?

Answer 28

• Hard to attract investors.
• Limited financial motivation for employees and managers.
• Few sources of capital.
• Democracy may slow decision-making.