3.2- Types of business organisations

Question 1

What is the definition of a sole trader?

Answer 1

A business owned and controlled by one person although they may employ workers

Question 2

What are some examples of businesses that can be sole traders?

Answer 2

Individuals who provide a specialist service like plumbers, hairdressers, photographers etc.

Question 2

What are some advantages of being a sole trader?

Answer 2

• Easy to set up
• Small capital investment means reduced start up cost
• Freedom to make decisions
• Own 100% of the business

Question 3

What are some disadvantages of being a sole trader?

Answer 3

• Lots of responsibility
• Long work hours
• Unlimited liability
• Cant take holidays / sick days as the businesses will loose money
• Owner has to do all tasks so specialise in all roles

Question 4

Does a sole trader have a separate legal entity from the business? What does this mean?

Answer 4

No, this means that in the eyes of the law, the business and the owner are the same. Therefore, the owner is personally liable for any debts and may have to pay losses made by the business out of there own pocket. This is also known as unlimited liability.

Question 5

What is the definition of a partnership?

Answer 5

A business that is owned by 2 or more people.

Question 5

Give some examples of businesses that are usually partnerships.

Answer 5

Doctors, dentists and solicitors are typical examples of professionals who may go into partnership together.

Question 10

What is a sole trader?

Answer 10

A sole trader is an individual who owns and operates a business alone, responsible for all profits and liabilities.

Question 11

True or False: A sole trader has limited liability.

Answer 11

False

Question 12

What is a partnership?

Answer 12

A partnership is a business structure where two or more individuals share ownership and responsibilities.

Question 13

Fill in the blank: In a partnership, profits are typically shared according to the ________ agreement.

Answer 13

partnership

Question 14

What distinguishes a limited company from other business types?

Answer 14

A limited company has its own legal identity and the owners’ liability is limited to their investment in the company.

Question 15

True or False: Shareholders in a limited company are personally liable for the company’s debts.

Answer 15

False

Question 16

What are the two types of limited companies?

Answer 16

Private Limited Company (Ltd) and Public Limited Company (PLC).

Question 17

Multiple Choice: Which of the following is a characteristic of a Private Limited Company (Ltd)? A) Shares can be sold to the public B) Limited liability C) Unlimited liability

Answer 17

B) Limited liability

Question 18

What is a franchise?

Answer 18

A franchise is a business model where a franchisee pays for the rights to operate a business under the franchisor's brand and system.

Question 19

True or False: In a franchise, the franchisee has complete control over the business operations.

Answer 19

False

Question 20

What is a cooperative?

Answer 20

A cooperative is a business owned and operated by a group of individuals for their mutual benefit.

Question 21

Fill in the blank: Cooperatives often focus on ________ rather than profit maximization.

Answer 21

member benefit

Question 22

What is a not-for-profit organization?

Answer 22

A not-for-profit organization is an entity that operates for purposes other than making a profit, often focused on social, educational, or charitable goals.

Question 23

True or False: Not-for-profit organizations can distribute profits to owners.

Answer 23

False

Question 24

What is the primary purpose of a public sector organization?

Answer 24

To provide services to the public and operate for the benefit of the community rather than to make a profit.

Question 25

Multiple Choice: Which of the following is an example of a public sector organization? A) Private school B) Local government C) Private hospital

Answer 25

B) Local government

Question 26

What is the main feature of a joint venture?

Answer 26

A joint venture is a business arrangement where two or more parties collaborate to undertake a specific project, sharing resources and risks.

Question 27

Fill in the blank: In a joint venture, the parties involved share ________ and ________ from the project.

Answer 27

profits; losses

Question 28

What is the difference between a shareholder and a stakeholder?

Answer 28

A shareholder owns shares in a company, while a stakeholder has an interest in the company's performance and decisions.

Question 29

True or False: Stakeholders can include employees, customers, and suppliers.

Answer 29

True

Question 30

What is an advantage of being a sole trader?

Answer 30

Sole traders have complete control over their business decisions and can keep all profits.

Question 31

What is a disadvantage of a partnership?

Answer 31

Partners share liability, which means personal assets may be at risk if the business incurs debt.

Question 32

Multiple Choice: Which business type is best suited for raising large amounts of capital? A) Sole trader B) Limited company C) Partnership

Answer 32

B) Limited company