Business Ownership

Question 1

Sole Trader

Answer 1

An individual who sets up a business on their own.

Question 2

Advantages of being a Sole Trader:

Answer 2

1) Easy to set up due to not having to fill out any legal documentation
2) You can make all of the decisions
3) You can keep all of the profit

Question 3

Disadvantages of being a Sole Trader:

Answer 3

1) Can be stressful managing a business on your own.
2) You have unlimited liability.
3) A lot of work and requires a significant amount of time.
4) You have to rely on your own finances.
5) Often higher costs and lower profits due to being a smaller business and not having as much control over distributors and suppliers.

Question 4

Unlimited Liability

Answer 4

Occurs when the personal possessions of the owners of the business are at risk if the business were to go bankrupt.

Question 5

Partnership

Answer 5

Occurs when two or more people set up a business.

Question 6

Deed of Partnership

Answer 6

An agreement made between partners that sets out the rules of the partnership, such as how profits will be divided.

Question 7

What may a Deed of Partnership include?

Answer 7

1) how profits will be divided
2) how decisions will be made
3) how to value the business if someone leaves
4) how to decide on whether someone else should join the partnership

Question 8

Advantages of a Partnership:

Answer 8

1) Each partner can contribute money if need be
2) Less work load
3) Each partner can specialise in a certain role in the business
4) Partners can cover for each other if one were ill meaning the business won’t go to a stand still

Question 9

Disadvantages of a Partnership:

Answer 9

1) Different ideas can lead to disagreements
2) Decisions may be made slowly due to everyone having to agree or be informed
3) Profit is divided
4) Unlimited liability

Question 10

Company

Answer 10

a business that has its own legal identity therefore can own items, sue and be sued.

Question 11

Shareholder

Answer 11

an owner of the company since they have a share of the business.

Question 12

Limited liability

Answer 12

there is a limit on the amount of money investors can lose as they can only loses their funds that were invested in the business not personal possessions

Question 13

Advantages of a Company:

Answer 13

1) limited liability
2) better status
3) can bring in investors

Question 14

Disadvantages of a Company:

Answer 14

1) have to register
2) information on profit and sales has to be disclosed
3) accounts need to be independently checked
4) if there are other investors the original founder is not in full control of the business

Question 15

Flotation

Answer 15

when a private limited company becomes a public limited company and has its shares listed on the Stock Exchange.

Question 16

Private Limited Company (LTD)

Answer 16

cannot publicly advertise its shares for sale and is often owned by family members

Question 17

Public Limited Company (PLC)

Answer 17

can advertise its shares publicly and can be listed on the Stock Exchange

Question 18

Stock Exchange

Answer 18

market for shares of PLC to be bought or sold

Question 19

Examples of LTDs:

Answer 19

Iceland and Specsavers

Question 20

Advantages of LTD:

Answer 20

1) limited liability
2) status
3) managers can be employed to run the day to day business whilst owners retain control and distribute profits amongst shareholders

Question 21

Disadvantages of LTD:

Answer 21

1) various legal procedures
2) a summary of the businesses financial accounts must be produced and made available to the general public
3) accounts must be checked by an independent accountant
4) the business must pay corporation tax
5) distribution of profits to shareholders

Question 22

Advantages of PLC:

Answer 22

1) can sell their shares publicly
2) more media coverage means free publicity
3) more status
4) investors can buy shares

Question 23

Disadvantages of PLC:

Answer 23

1) company may make a mistake therefore media coverage would have a negative impact on the business
2) a competitor can buy shares and take over
3) must abide by laws

Question 24

Co-operative

Answer 24

exists when a business is owned and run by their members (customers)

Question 25

Charity

Answer 25

a non-profit making organisation that is set up for ‘charitable purposes’