1.3 Business Ownership

Question 1

What is a sole trader?

Answer 1

A business own and ran by one person.

Question 2

What are the advantages of being a sole trader?

Answer 2

•the owner keeps 100% of the profit
• the owner makes all of the descions
•finances can be kept private

Question 3

What are the disadvantages of being a sole trader?

Answer 3

•unlimited liability
•lack of continuity- if the owner dies the business dies
•a lot of responsibility for 1 person- long hours and a lack of help & skills from others

Question 4

What is a partnership?

Answer 4

A business own and ran by 2 or more people

Question 5

What are the advantages of a partnership?

Answer 5

• Each partner may have a different speciality/skill
• Workload and debts can be shared amongst partners
•Owners can keep finance private

Question 6

What are the disadvantages of a partnership?

Answer 6

•Unlimited liability
•There could be disagreements between partners regarding descion making which could slow down the growth of the business
•Profit had to be shared between partners

Question 7

What is a private limited company? (Ltd)

Answer 7

An incorporated business where shares are sold privately to friends and family

Question 8

What are the advantages of being an ltd?

Answer 8

•limited liability
•the original shareholders have to agree before another share is sold reducing the risk of unwanted takeover
•finance can be raised more easily by selling shares

Question 9

What are the disadvantages of becoming an ltd?

Answer 9

•limited to how much capital you can raise as you cannot sell as many shares as a plc
•the business has to publish it’s accounts every year meaning financial information is open for competitors to see
•profits have to be given in the form of dividends which could cause conflict if shareholders think the money can be used somewhere else for expansion

Question 10

What is a public limited company? (Plc)

Answer 10

An incorporated business where shares are sold on the stock exchange

Question 11

What are the advantages of a plc?

Answer 11

•limited liability
•continuity- even if shareholder dies the business can continue to run
•finance needed to expand can be raised by selling shares and there is the potential to raise vast sums compared to an ltd

Question 12

What are the disadvantages of a plc

Answer 12

•There is a threat of takeover if 51% or more of the shares are bought by someone else
•Higher set up costs
•profits have to be given in the form of dividends which could cause conflict if shareholders think the money can be used somewhere else for expansion