Chapter 18~Forms Of Business

Question 1

Sole trader?

Answer 1

A person who owns and runs their own business with the aim of making a profit e.g doctors , farmers

Question 2

Unlimited liability ?

Answer 2

If a business goes bankrupt, the sole trader will lose the business but could also lose their personal possessions e.g house ect which may be sold to pay business debts

Question 3

Limited liability?

Answer 3

If the company is declared bankrupt, the owner will lose only what they invested. Their personal belongings are not at risk.

Question 4

Private limited company(ltd)?

Answer 4

A business that is owned by one or more people who share the risk, control and profit and enjoy limited liability

Question 5

Privatisation?

Answer 5

The selling of state owned businesses to the general public or to another business

Question 6

Memorandum of association?

Answer 6

This document covers the company’s dealings with the pubic

Question 7

Articles of association?

Answer 7

This document provides the internal guidelines for the day-to-day running of the company

Question 8

Co-operatives?

Answer 8

Businesses based on the idea of people helping each other. Set up by people who want to help themselves or their community. They usually have a common interest e,g live in the same area

Question 9

2 legal requirements for sole traders?

Answer 9

• Register persons own name and the shops name with the department of enterprise
• a pub or taxi needs a licence

Question 10

3 benefits of being a sole trader?

Answer 10

• all the profits belong to them alone
• procedures for setting up are quite simple
• trading hours are flexible

Question 11

3 disadvantages of being a sole trader?

Answer 11

• unlimited liability
• have to be an expert in every part of the business
• shortage of money makes it hard to expand

Question 12

3 advantages of a private limited company (incorporation)?

Answer 12

• Limited liability
• if they need to expand, they sell more shares
• decisions are shared

Question 13

2 disadvantages of a private limited company?

Answer 13

• The legal requirements in setting up a company are expensive
• profits must be shared

Question 14

Steps in forming a limited company

Answer 14

1) employ a solicitor to draw up the documents i.e The memorandum of association &articles of association& form A1
2) when these documents are ready a solicitor sends them to the registrar of companies
3) they are examined carefully and, if all is in order, a certificate of incorporation is issued (the birth cert of a company)

Question 15

2 pieces of information included in the memorandum of association?

Answer 15

• The aims of the company

- A statement of limited liability

Question 16

2 pieces of information included in articles of association?

Answer 16

• The total number of shares that the company can issue

- The way the directors or elected

Question 17

2 requirements when setting up a Co-Op?

Answer 17

• members of Co-Ops have one vote regardless of how many shares they own
• if the Co-Op goes bankrupt each member only loses the amount they invest (limited liability)

Question 18

3 advantages of co-operatives?

Answer 18

• Limited liability
• profits are returned to members as dividends on shares
• democratic-one person, one vote

Question 19

1 disadvantage of co-operatives?

Answer 19

• One vote per member means that people see no need to buy more shares, so finance can be scarce

Question 20

4 types of co-operatives?

Answer 20

• Producer co-operatives
• consumer co-operatives
• Worker co-operatives
• Financial co-operative e.g credit union

Question 21

3 reasons for state owned enterprises ?

Answer 21

• to provide a central services to all parts of the country not just a profitable areas e.g. An post
• some industries need a large amount of capital to set up e.g ESB
• to develop natural resources e.g. Bord na mona

Question 22

2 benefits of privatisation?

Answer 22

• both the government and the country benefit as the sale of companies bring in many millions of euros to the government
• successful companies can attract top management