3: Business Org; External Environment

Question 1

What is a Business?

Answer 1

An organisation in which uses economic resource to create goods or services which customers will buy

Also an organisation that provides jobs for people

An organisation that invests money in resources in order to make even more money for its owners

Question 2

What is a Company?

Answer 2

Any entity that engages in business and can be proprietorship, partnership or corporation

Forms of business organisation are sole proprietor/ trader, corporations, partnership and a limited liability company whether private or public

Question 3

What is a Trader/Sole Proprietor?

Answer 3

The business is owned by 1 person and is also responsible for the management of the venue

Most common form of business organisation

The sole proprietor pays taxes on revenue from the business under their name and is solely responsible for the financial operations of the company including payment of business debts

Easy to form and offers complete control to the owner

Question 4

Trader/Sole Proprietor
Advantages & Disadvantages

Answer 4

Advantages;
Relatively easy to set up
Owner keeps all the profits
Business tax is computed at the personal level

Disadvantages;
Limited lifespan (a business dies with owners death or retirement)
Owners bear unlimited personal liability for the business
The amount of equity that can be raised is limited
Ownership may be difficult to transfer because this transfer requires the sale of the entire business to a new owner