Business Ventures 1

Question 1

Features of a Sole Trader (Sole Papartaship)

Answer 1

1. Most common/basic
2. Owner takes all responsibility
3. Not costly to set up
4. Unlimited Liability
5. Not taxed
6. Capitcal sources are limited
7. Controlled by one person (duh)
8. Less formality required

Unlimited Liability is when the owners are held liabile for loss or anything they own can be sold to pay their debts

Question 2

What exactly is Sole parpatership?

Answer 2

A sole proprietorship, also known as the **sole trader **or simply a proprietorship, is a
type of business entity that is owned and run by one natural person

Question 3

Advantages of the sole papartership

Answer 3

1. Easy to fill out incorporation and tax documents
2. No formal incorporation, no regular meetings
3. Has** complete **control over every aspect of their business

Question 4

Disadvantages of Sole Papartaship

Answer 4

1. Unlimited Liability
2. Not seperate from the business owner

Question 5

What is a partnership?

Answer 5

Partnership is a type of business where 2 or more people agree to own, run and trade

Question 6

What are the types of Partnership

Answer 6

1. General: most basic, all partners are responsible for the running of the business, both are subjected to unlimited liability
   2.Limited: onegeneral partner who has unlimited liabilty, and the other has limited. The general partner takes responsibility for the business
   3.Limited Liability (LLB): A seperate legal entity** from **its members, nogeneral partners, they all share management.

Question 7

The differences between a General and Limited partner

Answer 7

General
1. MUST participate in daily management
2. Disadvantage of limited liability

LIMITED
1. Does NOT participate in the daily management
2. Enjoys limited liability (YIPPEEE)

Only similarity is they both contribute CAPITAL

Question 8

Partnership Deeds /Partnership Agreements can be..

Answer 8

They may be oral or written but it must be signed (by ALL members), sealed and delivered.

Question 9

What is included in the Partnership Law?

Answer 9

1. The amount of capital that has to be contributed by each partner
2. Amount of salary if any that has to be paid to each partner
3. Profits and Loss sharing ratio
4. Steps to be taken if a partner wants to leave
5. Rate of interest on capital and any withdrawls made by partners

Question 10

Advnatages and Disadvantages of partnership

Answer 10

Advatanges
* * Easy to set up
* * Solicitors and accountants are not required to run the business
* * Profits belong to the partners
* * Privacy. Only tax authorities need to be told how much partners are earning

Disadvantages
* *Disagreements between partners, which can be bad for business
* *Some partnerships don’t have a deed of partnership, which can be bad for business
* *Most partnerships are relatively small businesses e.g. Shops, farms

Question 11

What is a joint venture

Answer 11

A joint venture is an arrangement in which two or more business combine their resources to undertake a project that allows them to reach similiar goals

EG: Google and NASA joining to make Google Earth

Question 12

What are the features of a joint venture

Answer 12

• Comes to an end when objectives are met
• Shortterm
• A synergy as the partners pool their points of uniqueness
• Profits and loss are shared according to a predetermined ratio
• Management is shared

Question 13

What are the benifts of joint ventures

Answer 13

• Can experience faster growth
• Increase in productivity
• Sharing of risks
• Costs are reduced
• Expanded capacity as a result of pooling resources

Question 14

What is a franchise

Answer 14

A franchise is a legal agreement that allows someone to run a business using an established company’s brand and methods in exchange for fees and following set rules.

Question 15

What is a business formatfranchise?

Answer 15

A business format franchise is a franchising arrangement where the franchisor provides the franchisee with an established business,
including name and trademark, for the franchisee to run independently.

Example: Pizzahut, KFC, Mcdonalds

Question 16

What is a product franchise

Answer 16

A product franchise is a franchising agreement where manufacturers allow retailers to distribute products and use names and trademarks.

With product franchises, manufacturers control
how retail stores distrib

Question 17

What is a manufacturing franchise

Answer 17

A manufacturing franchise is a franchising agreement where the franchisor allows a manufacturer to produce and sell products using its
name and trademark.

for example, Coca-Cola sells the syrup concentrate to a bottling company

Question 18

Advantages of Franchises

Answer 18

1. Royalty Payments
2. Franchisee benifts from lower risk, lower startup costs, exisiting brand recognition
3. Franchisor benifts from expansion with less financial risks, greater geographical presense.
4. Brand recognition
5. Franchisor support
6. Franchising allows a business to have an international presence.
7. Franchisors can experience economies of scale

Question 19

Disadvantages of Franchises

Answer 19

1. Disadvantages to franchisors include a lack of control over franchisees, reputational risks, and slow growth through
2. franchising compared to mergers and acquisitions.
3. Disadvantages to franchisees include high costs and royalty payments, strict product rules, and other start-up challenges.
4. Entering into an agreement with an interested franchisor is important.Uninterested franchisors will not provide adequate support and only try to collect fees

Question 20

What is a Limited Liability Company

(LLC)

Answer 20

A Limited Liability Company (LLC) is a versatile business entity that combines features of both corporations and partnerships/sole proprietorships. While it is not a corporation, it offers the advantage of limited liability. Additionally, an LLC allows for** pass-through income taxation resembling partnerships**. This business structure is known for its flexibility and is particularly well-suited for single-owner companies.

Question 21

Advantages of a LLC

Answer 21

• LLCs have flexibility in choosing their tax treatment, with options including sole proprietorship, partnership, or corporation.
• LLCs with multiple members can allocate income, gain, loss, deduction, or credit through the company’s operating agreement if taxed as a partnership.
• Limited liability protects members from certain liability for the LLC’s actions and debts, depending on state laws.
• LLCs generally involve less administrative paperwork and record-keeping compared to corporations.

Question 22

Disadvantages of a LLC

Answer 22

• • Raising financial capital for an LLC can be challenging because investors often prefer the more familiar corporate structure, aiming for future IPOs.
• In many areas, LLCs are subject to franchise or capital values taxes, which are essentially fees paid to the state in exchange for limited liability protection. The amount of this tax can vary and is typically based on factors like revenue, profits, ownership numbers, capital invested, or a flat fee.
• Renewl fees may be higher
• LLC management structure may not be stated

IPOS=Initial Public Offering

(1) One possible solution may be to form a new corporation and merge into it disoliving the LLC and turning it into a cooperation
(2) So they basically have to pay fees to the goverment into exhange for protection from debt

Question 23

Variations of LLC’s

Answer 23

1. A Professional Limited Liability Company (PLLC) is a specific type of limited liability company formed to offer professional services, such as those provided by doctors, lawyers, accountants, and others who require a professional license business examples includes: Hair salons, Law firms, Nail Salons.

2.A Series LLC is like having a single parent company with multiple compartments or “series” within it. Each series operates as if it were its own separate business, with its own assets, liabilities, and even its own bank account. If one shuts down it doesnt affect the others.

3.An L3C, or Low-Profit Limited Liability Company, is a unique business structure designed to prioritize social impact over maximizing profits. Its like a mission drivenbusiness.

4.An Anonymous Limited Liability Company (LLC) is an LLC where the ownership details are kept private and not disclosed to the public by the state it’s registered in. This privacy is achieved by appointing a third-party organizer and registered agent.

Question 24

Private Companies

Answer 24

A private company offers limited liability to shareholders and cannot sell shares to the public, unlike public companies. It can have various names, like corporations or limited companies, and different categories come with specific requirements. When “limited by shares,” shareholders’ liability is limited to their initial investment, protecting personal assets. Private companies have lighter disclosure requirements but can’t offer shares to the public or trade on public stock exchanges, which is the key difference from public companies. Most small companies are private and often use “Limited” or “Incorporated” in their name.

If an investor invests $10, and the company falls into debt, the company only takes the $10 and wont take anything else.

Question 25

Advantages of Private Business

Answer 25

1. Private companies, when they want to raise money from outside investors, can get funds from various sources like angel investors, venture capital firms, institutional investors, and corporate investors
2. When a limited company is created, it must give initial members one or more shares. It can also issue more shares later. The total value of all the shares the company has issued is called its “issued share capital” (investors get some ownership of the company)
3. Private investors who put money into the company can provide valuable knowledge and oversight to improve its performance.

Question 26

Disadvantages of Private Companies

Answer 26

1. In private companies, shares are typically bought and sold through private agreements between the seller and the buyer. They are not available to the general public. **(The public cannot participate, investor potential is lessend) **

Question 27

What areNon Govermental Organisations

Answer 27

A non-governmental organization (NGO) is a not-for-profit group that operates independently of governments and international organizations. They often rely on donations for funding and may have volunteers running their operations.Some are recognized as charities, while **others get tax exemptions for their social goals. **

basically a non profit organization (charity)

Question 28

Features of NGO’s

Answer 28

1. Most NGOs are** small, flexible, and responsive due to their simple structures.** They can adapt quickly to clients’ needs and changing situations.
2. NGOs have introduced participatory methods and tested new technology with local knowledge
3. Many NGOs are more accountable to the organizations that fund them than to the people they aim to help.

Question 29

Advnatages of NGO’s

Answer 29

1. They have the ability to communicate at all levels, from the neighborhood to the top levels of government.
2. They can recruit both experts and highly motivated staff with fewer restrictions than the government.
3. They enjoy good rapport with people and can render micro-assistance to
   very poor people as they can identify those who are most in need and tailor
   assistance to their needs.

Question 30

Disadvantages of NGO’s

Answer 30

1. Paternalistic attitudes limit participation in program design.
2. Approaches to problems or areas are often restricted.
3. Possessiveness over an area or project hinders cooperation between agencies.
4. Reliance on external aid reduces the pressure on local and national governments to provide for their citizens.

Question 31

Types of NGO’s

Answer 31

• Community-Based Organisations (CBOs):arise out of people’s own initiatives. They can be responsible for raising the consciousness of the urban poor, helping them to understand their rights in accessing needs and services
• Social Enterprises: A social enterprise is an organization that uses business strategies to make the world better, both for people and the environment. They aim to create a positive impact on society while also generating profits for external shareholders.
• Charities and Endowment/Foundations: A charitable organisation is a type of non-profit organisation (NPO). **It differs from other types of NPOs in that it centers on philanthropic goals while an Endowment is a donation of money to a NPO
• Cooperative Societies: A cooperative (also known as co-operative, co-op or coop) is an
  autonomous association of people united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled business

Difference is that a social enterprise is a broader concept that encompasses various legal structures, while an L3C is a specific legal structure with** a primary focus on social impact**

Question 32

Types of Endowment

Answer 32

1. Unrestricted Endowment: The recipient can use the funds in any way they see fit to fulfill their mission.
2. Term Endowment Funds: **These funds have a specified time or event before **any or part of the (initial amount) can be spent. This depends on the donor’s wishes.
3. Quasi-Endowment Funds: Earnings from these funds can only be used for the purpose specified by the donor or source of the funds. The intent of the donor must be retained.
4. Restricted Endowments: Donors can restrict the use of endowment revenue for various purposes, such as funding professorships or scholarships for a particular subject
5. Quasi-Endowments** (Alternative View): Quasi-endowments are funds set aside by an organization’s governing board** for long-term investment, with the option to decide later whether to use the principal (the money).

Question 33

What is a foundation (Charitable Foundation)

Answer 33

A foundation (also a charitable foundation) is a legal category of nonprofit organisations that will typically** either donate funds and support
to other organisations or provides** the source of funding for its own charitable purposes. Foundations incorporate private foundations and
public foundations.

Question 34

Coop Principles and Values

Answer 34

1. Voluntary and open membership
2. Democratic member control
3. Economic participation by members
4. Autonomy and independence
5. Education, training, and information
6. Cooperation among cooperatives
7. Concern for community

Question 35

What is a state owned enterprise

Answer 35

A state-owned enterprise (SOE) is a legal entity that conducts business activities on behalf of the government. These entities can go by various names like state-owned companies, public corporations, or government-owned agencies
example: dutty JPS and NWC, JUTC

Question 36

Advantages Of SOE’s

Answer 36

1. Generally financed by the central or state government
2. May borrow funds from public and goverment organizations
3. if profitable, they may use the profits to finance other state services
4. Can recruit and appoint their employee with their service condition since they are a corporate body

Question 37

Disadvantages of SOE’s

Answer 37

1. They may be obliged to operate loss-making activities where it is judged that social benefits are greater than social costs
2. SOEs can be seen as too much government interference in economic affairs of citizens
3. When a resource is owned by the state or a government branch, individual use rights are based on government policies. (They may give you something but still has control over it)