business structures.

Question 1

what is the private sector?

Answer 1

the sector of the economy that is owned and controlled by individuals or groups rather than by the government
e.g. sole traders, limited companies

Question 2

what is the public sector?

Answer 2

owned and controlled by the government rather than individuals or groups.
e.g. state education, NHS.

Question 3

What are the aims of the private sector?

Answer 3

-profit
-growth
-survival

Question 4

what are the aims of the public sector?

Answer 4

provide a service to society:
-education and health care
-policing and defence.
-street lights, roads.

Question 5

what is a sole trader?

Answer 5

an individual who owns and runs their own business.
registered as self employed with HMRC.
Required to keep a record of all income and expenses.

Question 6

what is unlimited liability?

Answer 6

the owner/s are personally responsible for all debts run up by the business, their assets might be used to pay off any debts.

Question 7

what is limited liability?

Answer 7

the owners are NOT personally responsible for all the debts ran up by the business, their assets are safe, they only lose what they put into the business.

Question 8

benefits of being a sole trader?

Answer 8

-cheap and easy to set up
-all profits go to the sole trader
-autonomy in decision making.
-financial records remain private
-motivation is high

Question 9

what are some drawbacks of being a sole trader?

Answer 9

-unlimited liability
-limited capital for investment
-little specialist skills
-difficulty in finding cover when ill.

Question 10

what is a partnership?

Answer 10

where two or more people share the costs, risks and responsibilities of being in business together, also all partners have to be registered as self employed with HMRC.

Question 11

What is a sleeping partner?

Answer 11

they invest in the business but do not manage.

Question 12

benefits of a partnership?

Answer 12

-Risks, costs and responsibilities are shared​
-More scope for specialist skills​
-Simple and flexible​
-Financial records remain private​
-More capital can be raised than as a sole trader​.

Question 13

drawbacks of being in a partnership?

Answer 13

-Unlimited liability​
-Arguments can occur with decision making​
-If a partner dies, resigns or goes bankrupt the partnership is dissolved​
-Trust becomes a significant element between partners

Question 14

what is a limited company?

Answer 14

they’re a business that exist in their own right, the owners and the company are separate legal entities. shareholders are the owners.

Question 15

what is a private limited company?

Answer 15

the have Ltd after their name.
owned by shareholders who are known to the company, often family and friends.
they cannot sell shares openly on a stock exchange.

Question 16

what are advantages of a private limited company?

Answer 16

-Limited Liability​
-Separate legal identity​
-More flexible than a Plc.​
-Financial records remain relatively private​
-More capital can be raised through the sale of shares​

Question 17

what are disadvantages of a private limited company?

Answer 17

-More complex to set up due to increased legal requirements​
-Some loss of control as shareholders have voting rights​
-Unable to sell shares to the public​

Question 18

what is a public limited company?

Answer 18

have Plc after their name.
shares can be sold to the public via a stock exchange, open to more public scrutiny.

Question 19

advantages of a public limited company?

Answer 19

-Limited Liability​
-Separate legal identity​
-Perceived status of having Plc after the name​
-More capital can be raised through the sale of shares​.

Question 20

disadvantages of a public limited company?

Answer 20

-Lack of privacy as financial performance is available for all to view​
-More complex to set up due to increased legal requirements and ongoing administrative costs​
-Some loss of control as shareholders have voting rights​
-Risk of hostile takeovers​

Question 21

what factors affect the choice of legal structure?

Answer 21

-ability and need to raise finance
-nature of the business (accountants and dentists are often partnerships)
-personal preference
-support from partners
-willingness to share equity
-size of the business
-un/limited liability.