business ownership

Question 1

what is a partnership

Answer 1

a business owned by between 2-20 partners

Question 2

what is a sole trader

Answer 2

a business owned by an individual

Question 3

what happens to a business when it becomes incorporated

Answer 3

it separates legally from the business owner

Question 4

are sole traders and partnerships incorporated

Answer 4

no

Question 5

are private and public limited companies incorporated. What does this mean

Answer 5

yes - they have limited liability

Question 6

describe the features of a sole trader using the 7 headings

Answer 6

easy to set up
easy for owner to control - they make all the decisions
no continuity as business stops when owner dies
Business info is kept private no information about profits is published
Raising finance is hard as there is only 1 investor who can’t sell shares - risky for bank
the owner are unlimited in their liability

Question 7

describe the features of a partnership using the 5 headings

Answer 7

easy to set up
easy for owner to control as partners make the decisions - may disagree and have to share profits
no continuity a new deed is needed when partner leaves or dies
business info is kept private
raising finances is difficult only a few partners and can’t sell shares
workload is high for owner - long hours

Question 8

describer the features of a Private Ltd company using the 7 heading s

Answer 8

not so easy to set up - need to register at companies house
it is easy to control as the owner can restrict who buys shares
there is continuity as business continues without the owner
business info is not private - seen by public
raising finances is easy as new share holders can invest so banks are more willing to lend
partners have unlimited liability
work can be shared between partners

Question 9

describe the features of a public limited company using the 7 headings

Answer 9

it is difficult to set up - need to go to companies house
it is difficult for the owner to keep control as anyone can buy shares
there is continuity if anything happens to owner business continues
business info is seen by public
raising finaces is easy as new share holders invest so bank are more willing to lend
ltd liability
employ others to do work

Question 10

what is a deed of partnership

Answer 10

document states who owns partnership how much money each put in and their role in business

Question 11

what is a share

Answer 11

a part of the company owned

Question 12

what does limited liability mean

Answer 12

the business owner can only loose the money they have invested in the business if it fails

Question 13

what does unlimited liability mean

Answer 13

owner is responsible for repaying all debts of the business

Question 14

compare limited and unlimited liability (3)

Answer 14

effects on owner - limited liability share holders do not use own money to pay debts if business fails - unlimited must pay back all debts and if bankrupt sell assets and own possessions
effects of business - limited attacts investment because no risk to possessions - unlimited limits expansion as investors do not want to take the risk
Other - limited there is a complicated legal document - an unlimited is easy to set up

Question 15

what are assets

Answer 15

items owned by a business - stock buildings vehicles equipment

Question 16

what is finance

Answer 16

money used to start up or expand business

Question 17

what is an established business

Answer 17

one that has been trading for some time

Question 18

what is a start up

Answer 18

a new business

Question 19

what is a sleeping partner

Answer 19

someone who provides capital but takes no interest in the business - they are liable for losses if it is not LTD

Question 20

which business type is best for
sole trader
partnership
private LTD
public LTD

Answer 20

sole - start up
partnership - start up or established wanting to grow
Private LTD - start up and established wanting to grow larger
Public LTD - etablished

Question 21

what are the advantages (5) and disadvantages (5) of being a sole trader

Answer 21

advantages
cheap to start no capital needed
stay in control
get all profits
you make all decisions
financial info stays private

disadvantages
unlimited liability so responsible for all debts might have to sell possessions
if you fall ill it is difficult to keep going
captital is often short with only 1 person raising money
long hours of work
owner may not have all the skills needed
business finishes when owner dies

Question 22

Advantages (4) and disadvantages (3) of being in a partnership

Answer 22

Advantages
share raising the capital
easy to set up - need declaration of partnership
skills can be varied between partners
workload and stress shared

disadvantages
profits are shared
unlimited liability so liable for debts may have to sell possessions
all have to agree on the decisions

Question 23

Advantages (5) and disadvantages (4) of a Ltd Company

Answer 23

Advantages
there is ltd liability so it encourages investors
possessions are safe
there are lots of people with different skills
banks more likely to lend
shares only sold if shareholders agree

Disadvantages
financial information available to public and therefore competitiors
It is more complex to set up
sale of shares is restricted so can be hard to agree who to sell to leds to loss of investment
difficult to please all share holders

Question 24

Advantages (3) and disadvantages (4) of public LTD company

Answer 24

Advantages
easy to raise capital as shares are sold to public
banks will lend
limited liability so only loose what you invest

Disadvantages
posibility of takeover competitor could buy 51% of shares on stock exchange
cost of setting up is complex and expensive
they can become big and difficult to manage
the public and competitors have access to accounts