Business Structure And Types Of Business Ownership

Question 1

Define the term private sector?

Answer 1

Made up of all organisations that are owned by private individuals and shareholders

Question 2

Define the term public sector?

Answer 2

Made up of organisations owned and funded by the government

Question 3

Name four private sector aims?

Answer 3

To make a profit
To increase shareholder value
Survival
Growth and gaining market share
Ethics

Question 4

Name a public sector aim?

Answer 4

Provide goods and services to maintain and improve standard of living in the uk
To allow people to live safely and securely
To grow the uk economy

Question 5

Define the term public good?

Answer 5

Good which are NON RIVALRY and NON EXCLUDABLE and are provided by the government eg. Streetlights

Question 6

Define the term non excludable

Answer 6

No individual can be prevented from enjoying the benefits of the provision and no one is excluded

Question 7

Define the term non rivalry

Answer 7

Means one person gaining from consumption of a good or service does not prevent others from also gaining the good/ service

Question 8

Define the term merit good?

Answer 8

Merit goods are goods that if they were left solely to the private sector they would be UNDERCONSUMED

Question 9

Why do we need a private sector?

Answer 9

To meet society’s wants
Tax payers
Job creators
Innovation
Increases GPD
more choice
Gives lower prices

Question 10

Benefits from the goods in the public sector

Answer 10

Merit goods improve the quality of life
The private sector cannot charge people for the use of the public goods

Question 11

Limitations of the public sector

Answer 11

Burden on the government
Don’t provide as high quality products and services as the private sector

Question 12

Define the term sole trader?

Answer 12

A business that is owners by one person by they can employ as many people as they want

Question 13

Are there any legal formalities involved when setting up for sole traders?

Answer 13

No

Question 14

What must a sole trader do when their turnover is over £83,000

Answer 14

Register for a VAT

Question 15

Is a sole trader an unincorporated business?

Answer 15

Yes

Question 16

Name two advantages of becoming a sole trader?

Answer 16

No lengthy set up procedures, any profit made is kept by the owner
Owner is in complete control
Get to choose own hours for working
Make all decisions
Persue an interest

Question 17

Define unlimited liability

Answer 17

Where a owner is liable for any debts that can’t be paid off and their personal possessions are at risk

Question 18

State two disadvantages of becoming a sole trader?

Answer 18

Unlimited liability
Find it difficult to raise finance
Immense pressure
Limited range of skills available

Question 19

Define the term partnership?

Answer 19

Where 2-20 people own a business

Question 20

What is included in a deed of partnership?

Answer 20

How much capital each partner will contribute
How the profits and looses will be divided evenly
The procedure of ending the partnership

Question 21

What are some advantages of a partnership?

Answer 21

Wider range of skills are available
More finance can be raised more easily
Partners can share workload

Question 22

Name some disadvantages of a partnership

Answer 22

Unlimited liability
Decision making may be slower
Partners may disagree/ argue
Lower financial reward than sole trader as profit is shared

Question 23

What is a limited company?

Answer 23

These are businesses that exist separately from their owners

Question 24

Give two examples of limited companies?

Answer 24

PLC Ltd

Question 25

What is separate legal existence known as

Answer 25

Incorporation

Question 26

Are limited companies incorporated or corporates businesses

Answer 26

Incorporated

Question 27

What is a Memorandum of Association?

Answer 27

It gives details of the company

Question 28

What is an article of association?

Answer 28

This gives details on the running of the company

Question 29

What does LTD stand for

Answer 29

Private limited company

Question 30

What are three advantages of being an Ltd

Answer 30

Shareholders have limited liability
More capital can be raised
Control of the company can’t be lost

Question 31

What are three disadvantages of a Ltd?

Answer 31

Legal procedure needed to set up the business
Firms are not allowed to advertise shares to the public which restricts the amount of capital that can be raised
Profits have to be shared

Question 32

What does PLC stand for

Answer 32

Public limited company

Question 33

In plc s where are shares sold and who to

Answer 33

Shared can be bought and sold to the public on the stock exchange

Question 34

What are three advantages of becoming a PLC

Answer 34

Huge amount of money can be raised
Due to their size they can often dominate markets
Production costs may be low as firms may gain economies of sale
More likely to get a bank loan as they are seen as lower risk

Question 35

What are three disadvantages of a Ltd?

Answer 35

Divorce of ownership and control
Very expensive to set up
All of the companies accounts can be inspected by members of the public

Question 36

Define divorce of ownership and control

Answer 36

Where the owners of a business do not control the day to day decisions made in the business

Question 37

What are some of the factors affecting choice of the legal structure of a business

Answer 37

Objectives of ownership
Finance available
Stage in business lifetime
Target market
Skills needed
Need for finance