Chapter 4

Question 1

what is a sole trader

Answer 1

This is when a business is owned by one person

Question 2

what are the advantages and disadvantages of being sole trader

Answer 2

The owner can choose their own holidays
They have full independence and he is his own boss on what products they want to make
They can choose how much to pay their employ
They have close contact with customers
There are a few legal regulations to worry about
They do not have to give information of their business to others or the public

There is no one to discuss business matters with or get new ideas for new products
There is no limited liability
Very little for expansion so the business is likely to remain small
Unincorporated business

Question 3

what is limited liability?

Answer 3

Limited liability is when the liability of shareholders is only limited to the amount they have invested in a company

Question 4

what is an incorporated an unincorporated business?

Answer 4

An incorporated business is when a business can continue after the death of the owner 

Question 5

what is a partnership

Answer 5

A partnership is when two or more people agree to jointly own a business
There is a partnership agreement between the individuals and this is a legal agreement

Question 6

what are the advantages of a partnership?

Answer 6

A partnership can bring new ideas into the business
The risks of the business are shared
There’s more capital to invest into the business

Question 7

what are the disadvantages of a partnership?

Answer 7

There is still no limited liability
It is still an unincorporated business
Profits will be shared
There’s still not enough to invest into the business to expand it
There may be disagreements or clashes between the business partners

Question 8

What is a private limited company?

Answer 8

This is a company that is owned by shareholders where shares cannot be sold to the public

Question 9

What are the advantages of private limited company’s?

Answer 9

Since shares can be sold to relatives or friends, there can be larger sums of capital that can be reinvested into the business
The shareholders have limited liability
It is an Incorporated business
As long as it’s not too many shares are sold, the business size can be maintained and managed

Question 10

What are the disadvantages of private limited company’s?

Answer 10

Since shares cannot be sold to the public, there’s still not enough capital that can be raised to reinvest into the business for its expansion
There are a lot of legal matters that need to be taken care of before starting up the company which can be time consuming
Many of the businesses accounts, such as financial records, are available to the public, such as competitors

Question 11

What is a public limited company?

Answer 11

Public limited company is owned by shareholders however, they can sell shares to the public

Question 12

What are the advantages of a public limited company?

Answer 12

Since more shares can be sold to the public greater sums of money can be reinvested into the company
Incorporated business
Limited liability
Public limited companies are usually a lot larger as they have a greater status which can attract many investors and suppliers

Question 13

What are the disadvantages of public limited company’s?

Answer 13

Because a large amount of shares are sold to the public. The business may get out of control and difficult to manage.
The legal requirements are very time consuming and complicated
There are a lot of regulations and restrictions, put on public limited company is in order to protect the interests of the shareholders
It is expensive to sell shares
Business accounts, an information is available to the public

Question 14

What is the annual general meeting?

Answer 14

Since public limited company’s have a great amount of shareholders, and it is difficult to make decisions in such a large company, an annual general meeting is a legal formality that is needed for all public limited company’s
This discusses: shareholders will choose the board of directors for the coming year, and the directors are those who will run the company and make decisions. They will also choose managers. He will carry out the simple day-to-day tasks in order to delegate their tasks.
Dividends of the shareholders are also discussed

Question 15

What are dividends?

Answer 15

Dividends are the payments made to the shareholders in return for them investing into a company, and this is based on the profits of a company

Question 16

What is a franchise?

Answer 16

A franchise is a business that uses brand names of other successful companies. This is where a franchisee will buy a license from a franchise server to operate their business names.

Question 17

What are the advantages and disadvantages of a franchise to the franchisor?

Answer 17

The license is bought by the franchisee from the franchisor which gives them more income, and they’re aiming to expand the business which can provide more profits and income
Management of each franchise is up to the franchisee, which limits the burden on the franchiser

Poor management of a franchise can lead to bad reputation of the business
Most of the profits are kept by the franchisee

Question 18

What are the advantages and disadvantages of a franchise to the franchisee?

Answer 18

The company is less likely to fail, as it is already a successful company
Banks are willing to learn loans, as there is less likelihood of business failure
Everything needed to start up the franchise is provided by the franchisor

There’s a little independence and freedom for the franchisee to make their own decisions in the company
The franchisee has to buy the license from the franchiser which may be quite expensive

Question 19

What is a joint venture?

Answer 19

A joint venture is when two or more businesses agree to start a project together

Question 20

What are the advantages and disadvantages of a joint venture?

Answer 20

Risks and costs are shared
More ideas are brought into the company

Profits need to be shared
There may be disagreements or clashes (eg: how the business is run)

Question 21

What is the public corporation?

Answer 21

This is a business in the public sector, owned by the government

Question 22

What are the advantages and disadvantages of a public corporation?

Answer 22

These are usually important businesses
If a business is feeling, the government can nationalize it

There’s no close competition
There may be a little profits
Governments may use these businesses for political reasons
If the government is providing subsidies or help to the managers, they may become reliant on the business can fail