Business Ownership

Question 1

Sole Trader-Definition

Answer 1

Sole trader- The smallest type of business usually one person running it and is responsible for all aspects of the business

Question 2

Partnerships- Definition

Answer 2

-Owned and run by 2-20 people and are jointly responsible for the business

Question 3

Private Limited Company - Definition

Answer 3

Private Limited Company- Has LTD after its name and has limited liability and shares are returned for money to allow the owners to raise capital

Question 4

Public Limited Company- Definition

Answer 4

Public Limited Company(PLC)- The largest type of business run by directors and shares can be sold on the stock market and raises funds by selling shares

Question 5

Partnerships

Advantages + Disadvantages

Answer 5

Advantages-
- The business is easy to establish and start up costs are low
- High-calibre employees can be made partners
Disadvantages-
- There is a risk of disagreements and friction among partners and management
- The liability of the partners for the debts of the business is unlimited

Question 6

Sole Trader

Advantages + Disadvantages

Answer 6

Advantages-
- You keep all the profits
- Start-up costs are low
Disadvantages-
- All the responsibility for making day-to-day business decisions is yours
- Retaining high-calibre employees can be difficult

Question 7

Private Limited Company

Advantages + Disadvantages

Answer 7

Advantages-
- Protection from personal liability to Limited company owners
- Added credibility for Private Limited Companies, which can make it easier for a Private Limited Company to borrow money
Disadvantages-
- Private Limited Companies pay annual fees and have periodic filing obligations
- A Limited Company is more expensive to set up than a sole trader or partnerships

Question 8

Public Limited Company

Advantages + Disadvantages

Answer 8

Advantages-
- Able to raise capital for expansion by selling additional shares
- Higher status than a public limited company so will benefit from more publicity
Disadvantages -
- Original owners lose control and ownership of the business.
- Must disclose all main accounts to the public. These are often greatly publicised by the media.

Question 9

What is a franchise?

Answer 9

When a business allows another person or business to trade using its name and to sell its products it services. Franchises has to pay a licence fee and a percentage profit to the franchisor

Question 10

Franchise advantages and disadvantages

Answer 10

Adv-
-Lower risk option
-Can grow quickly
-Use national advertising campaigns
Dis-
-Franchisor will keep a share of the profits
-Reliant in others to maintain standards
-Complex procedures to set up as a franchise