Business types and legal structures

Question 1

Definition of a sole trader

Answer 1

A sole trading business is a small business owned by one person only. They have unlimited liability.

Question 2

Where can a sole trader get money from for their business?(6)

Answer 2

• bank loan
• family and friends
• venture capitalists/ business angels
• own funds
• re-invested profit
• selling assessts

Question 3

Definition of a partnership

Answer 3

A business owned by between 2 and 20 people. They usually have a deed of partnership which is an agreement between the partners about their shares and who does what. They have unlimited liability

Question 4

Definition of unlimited liability

Answer 4

A business and ther owner(s) are legally seen as the same thing, the owner can be sued or can have personal possessions taken if they cannot pay business debts.

Question 5

Features of sole traders

Answer 5

• You are your own boss (meaning you choose your holidays, however you aren’t paid and have nobody to cover for you)
• 1 owner
• no sick or holiday cover (the business will be closed)
• keep all profit
• risky
• do all accounts and marketing
• stock control
• unlimited liability
• can employ people

Question 6

Features of partnerships

Answer 6

• 2-20 owners
• no longer the only boss, you have to agree, can lead to arguments
• profit is shared
• someone to cover illness/holidays
• roles shared between people, including the following:accounts and marketing, stock control, responsibility for bills, ect.
• unlimited liability shared between owners
• can employ people

Question 7

Definiton of an LTD (private limited company)

Answer 7

a business owned by share holders which have to be selected by the current owners
limited liability

Question 8

Definiton of a PLC (public limited company)

Answer 8

a business owned by shareholders who are members of the public (anyone could buy shares)
limited liability

Question 9

Definiton of a dividend

Answer 9

the reward paid out to shareholders, this is a percentage of the companies profit

Question 10

Definition of limited liability

Answer 10

means shareholders can only lose what they invested into the business and not their personal possessions

Question 11

definiton of a franchise

Answer 11

a franchise us an agrrangement allowing another business to trade in the same style as an existing business

Question 12

Definition of franchisor

Answer 12

the person or business who offers to franchise to other businesses its trading methods, products and business logos in return for a royalty

Question 13

definition of a franchisee

Answer 13

a person or business buying the franchise

Question 14

definition of a royalty

Answer 14

a payment made to the franchisor based on the sales turnover of the franchise

Question 15

What is a co-operative?

Answer 15

a business thats main aim is to keep their members happy (their members being the stakeholders). this means that they share the many of their profits with their members and give them many royalties, such as bonuses and discounts