Business ownership

Question 1

What is public limited company (PLC) ?

Answer 1

They sell shares to anyone who wants to buy them

Question 2

What is private limited company (LTD) ?

Answer 2

They sell shares to only the people that are invited

Question 3

What is a sole trader ?

Answer 3

A business own by one person

Question 4

What is Partnership ?

Answer 4

A business owned by 2-20 people

Question 5

What is the deed of partnership ?

Answer 5

A written agreement

Question 6

What are the advantages of sole trader ?

Answer 6

• Easy to set up = few forms to complete
• Easy to control = owner makes decisions
• business info can be kept private

Question 7

What are the disadvantages of being a sole trader ?

Answer 7

• The business stops once owner dies
• Finance = only one person to invest
  savings so banks may not lend.
• unlimited liability

Question 8

What are the advantages of Partnership ?

Answer 8

• Easy to set up
• they make decision among themselves.
• No info on profits must be published
• Workload is shared

Question 9

What are the disadvantages of partnership?

Answer 9

• Disagreements in decision making
• Sharing profit
• new deed of partnership when someone
  leaves or joins
• few partners to invest = risky
• cannot sell shares to raise finance
• unlimited liability
• fewer partner = more workload

Question 10

What are the advantages of PLC ?

Answer 10

• business continues shareholders die
• new shareholders can invest = banks lend
  money
• owners benefit from limited liability

Question 11

What are the disadvantages of PLC ?

Answer 11

• require legal documents= takes time
• Anybody can buy shares
• public can see information about the
  business
• Managers are employed to make decisions

Question 12

What are the advantages of LTD ?

Answer 12

• Shareholders can restrict who buys shares
• Business continues if shareholder dies
• continues if shareholder sells their shares
• New shareholders can invest and banks
  are willing to lend
• Owners have limited liability

Question 13

What are the disadvantages of LTD ?

Answer 13

• legal documents which takes time
• Public can see information
• Managers are employed to make decisions

Question 14

What is limited liability ?

Answer 14

It means business owners are responsible for the debt up to the value of financial investment and businesses belongings are taken.

Question 15

What is unlimited liability ?

Answer 15

Owner is responsible for all the debt of business and their personal belongings may be taken.

Question 16

What is the effect of limited liability on owner ?

Answer 16

Shareholders are willing to invest since none of their possessions are at risk to pay off debt

Question 17

What is the effect of limited liability on business ?

Answer 17

helps raise extra finance to expand as people are willing to invest more as they’re not risking their possessions

Question 18

What effect does unlimited liability have on owner ?

Answer 18

• owner must pay back all the loan
• if business goes bankrupt, owner has to
  sell their assets.
• If sales does not rise enough, owners can
  be ordered to use their own savings and
  sell their personal assets to pay off debt

Question 19

What effect does unlimited liability have on business ?

Answer 19

• discouragement to set up business
• limit creation of partnership and sole
  trader business.

Question 20

What are other impacts of limited liability ?

Answer 20

complicated since you have to get the legal documents completed and sent to the Registrar of companies.

Question 21

What are other impacts of unlimited liability ?

Answer 21

Easy to start up sole trader or partnership as legal documents don’t have to be sent to the Registrar of companies

Question 22

What is sole trade suitable for ?

Answer 22

Start ups that:
- only need a small amount of finance
- have a low financial-risk
- require limited or non-specialist skills

Question 23

What is Partnership suitable for ?

Answer 23

start-ups and established businesses that:
- need larger amounts of finance
- low financial risk
- wider range of skills
- have owners who want to keep control of
business

Question 24

What is PLC suitable for ?

Answer 24

Established business that:
- wishes to grow
- needs large amounts of finance
- has a high financial risk

Question 25

What is LTD suitable for ?

Answer 25

start ups and established business wanting to grow that :
- need larger amounts of finance
- increase or high financial risk
- have owners who wish to keep control of
the business