1.3 Forms Of Ownership

Question 1

What are the 6 forms of ownership ?

Answer 1

Sole trader
Partnership
Private limited company (PLC)
Public limited company
Government or state owned
Charity / non profit

Question 2

What is meant by sole trader and the advantages and disadvantages ?

Answer 2

Small private business
A one person business
Unlimited liability
Must register with HM REVENUE and customs

Advantages :

Keep all profits
Easy to make decisions
All financial info is kept confidential
Easy to set up

Disadvantages :

Unlimited liability
Capital, owner contributes so it could have a shortage
Workload, all work to be carried out alone unless employee helps
Skills, lack a variety is skills within the business

Question 3

What is meant by partnership and it’s advantages and disadvantages ?

Answer 3

2 - 20 people set up
Profits shared
E.g. dentists, estate agents etc

Advantages :

More money can be put into the business.
Skills, wider variety of skills because there’s more people
Workload can be shared
Cost, shared
Financial info kept confidential

Disadvantages :

Profits have to be shared
Unlimited liability
Disagreements, harder for decision making

Question 4

What is meant by private limited company and what are the advantages and disadvantages ?

Answer 4

Must register with companies house
Limited liability
Owned by shareholders

Advantages :

Limited liability
Shares, can be issued to raise capital
Shareholders can sell their shares for continuity of the business
Finance, shareholders bring more capital into the business

Disadvantages :

Financial info available to shareholders and public
Availability and sale of shares.
Lack of capital, can be hard to find new shareholders because shareholders existing may not be able to provide capital

Question 5

What is meant by public limited company and what are the advantages and disadvantages ?

Answer 5

Shares available to purchase
May pay part of its profits to shareholders in the form of dividends

Advantages :

Shares, sell freely to raise capital
Limited liability
Shareholders can sell their own shares and the company will continue
Borrow, easy to borrow money

Disadvantages :

Availability of financial info
Set up cost, complicated and expensive
Take over, shares are traded which makes risk as other companies can buy large percentage of shares

Question 6

What is meant by government owned and its advantages and disadvantages ?

Answer 6

Government controls some organisations

Advantages :

Gov can support large businesses that are struggling to survive
Ensure vital industries survive

Disadvantages :

Possible higher prices charged over time because of expansion
No shareholders, won’t prioritise cost control
Bsuienss can be used for political gain

Question 7

What is meant by charity and it’s advantages and disadvantages ?

Answer 7

Not for profit
Volunteers
May make profit but would invest in their cause

Advantages :

Same as sole trader
Easy to set up

Disadvantages :

Same as sole trader
Dependent on volunteers and donations
Set up is expensive