1.2 Types of business entities

Question 1

Public sector

Answer 1

Owned and controlled by the government

Question 2

Private sector

Answer 2

Portion of an economy not controlled by the government

Question 3

Private sector

Answer 3

Not controlled or owned by the government

Question 4

Public sector

Answer 4

Controlled or owned by the government

Question 5

Sole trader

Answer 5

Business owned and operated by ONE person.

Question 6

Advantages of a sole trader

Answer 6

Complete control
Flexibility
Privacy
Minimal legal formalities
Close ties w customers

Question 7

Disadvantages of a sole trader

Answer 7

Established competitors by yourself
Stress or inefectiveness
Limited space for expansion
Limited capital
Unlimited liability
Ceases when owner dies

Question 8

Partnership

Answer 8

Owned and operated by two or more people

Question 9

Advantages of a partnership

Answer 9

More knowledge and skills
Greater stability, lower risks
Partners can help

Question 10

Disadvantages of a partnership

Answer 10

Each has unlimited liability
Less access to loans
No complete control from one
Profits shared
Disagreements

Question 11

Companies/corporations

Answer 11

The business and the owners are legally separated

Question 12

Advantages of being a shareholder

Answer 12

Value increases
Profits from dividends
Limited liability

Question 13

Disadvantages of being a shareholder

Answer 13

Decreased value?
Company may choose not to give the dividends
No impact on company decisions

Question 14

Privately held company

Answer 14

Shares cannot be traded on a stock exchange

Question 15

Publicly held company

Answer 15

Shares are traded on some public exchanges

Question 16

Advantages of a company

Answer 16

Finance is more available
Investors have limited liability
Continuity
Possibilities of expansion
Established structure

Question 17

Disadvantages of a company

Answer 17

Takes time to set up
Selling shares doesn’t mean there will be finance
Owners risk control of the company
Loss of privacy
No control over stock market
No control over who buys its shares

Question 18

Social enterprise

Answer 18

A business that advances a social purpose in a financially sustainable way.

Question 19

For-profit social enterprise

Answer 19

Similar to social enterprise except that it earns a profit which might be distributed to owners.

Question 20

Cooperative

Answer 20

Social enterprise operated by its members who share the profits

Question 21

Advantages of for profit social enterprises

Answer 21

Achieved legal status
Strong communal identity
Stakeholder community benefits

Question 22

Disadvantages of for profit social enterprises

Answer 22

Decision making is complex
Capital may be insufficient for growth or financial strenght

Question 23

Non-profit social enterprises

Answer 23

Similar to a social enterprise that does not earn profit and provides social service

Question 24

Advantages of non-profit social enterprises

Answer 24

They help people or causes
Foster positive spirit in the community
Can innovate

Question 25

Disadvantages of non-profit social enterprises

Answer 25

Intense lobbying can lead to socially undesirable goods
Funding can be irregular