1.4.1 Types of business organisation

Question 1

business organisations in private sector

Answer 1

> sole traders
> partnerships
> private limited companies
> public limited companies
> franchises
> joint ventures

Question 2

sole trader

Answer 2

a business owned by one person

Question 3

benefits of being a sole trader

Answer 3

> has close contact with customers so able to response quickly to their needs and demands
No need share profit
Owner in complete control = freedom in making decisions

Question 4

disadvantages of being a sole trader

Answer 4

> unlimited liability = if have debt and business can not pay, owners have to use private possession to pay the debt.
> limited capital  
> hard to expand
> remain small
> easy to give up

Question 5

limited liability means

Answer 5

the liability of shareholders in a company is limited to only the amount they invested

Question 6

unlimited liability means

Answer 6

The owner of a business can be held responsible for debts of the business they own.
Their liability is not limited to the investment they made in the business.

Question 7

Partnership

Answer 7

a form of business in which two or more people agree to jointly own a business

Question 8

A partnership agreement means

Answer 8

the written and legal agreement between business partners.

Question 9

benefits of partnership

Answer 9

• more capital to allow business expansion.
• responsibilities of running business is shared.
• Any losses will be shared.
• More ideas from new partner
• partner can specialize

Question 10

disadvantages of a partnership

Answer 10

• unlimited liabilities
• if one partners died, then partnership would end.
• if one partner being inefficient or dishonest, the other partners could suffer by losing money.

Question 11

incorporated business

Answer 11

companies that have separate legal status from their owners

Question 12

examples of unincorporated business

Answer 12

sole trader

partnership