chapter 4.1

Question 1

There are several main forms of business organisations in the private sector, these are:

Answer 1

• Sole traders
• Partnerships
• Private limited companies
• Public limited companies
• Franchises
• Joint ventures

Question 2

Sole Trader

Answer 2

A business owned by one person

Question 3

Disadvantages of sole traders :

Answer 3

No one to discuss business matters with.
Unlimited liability
The business does not have a separate legal identity (It is an unincorporated business)
May not have finance to expand the business.
If owner is ill, then business may have to close
If owner dies, then business also dies.

Question 4

Private limited companies (LTD)

Answer 4

Businesses owned by shareholders but they cannot sell shares to the public.

Question 5

A company has a separate legal identity from its owners –it is an incorporated business. This means that:

Answer 5

A company exists separately from the owners and will continue to exist if the owners die.

A company can make contracts or legal agreements

Company accounts are kept separate from the accounts of the owners.

Question 6

Disadvantages of ltd

Answer 6

1.Two important documents have to be sent to the Registrar of Companies
•The articles of association –contains the rules of the business
•The memorandum of association –names of owners, names of directors, etc

2. Both of these documents are intended to make sure that companies are correctly run.
3. The shares in a private limited company cannot be sold without the agreement of everyone else.
4. The accounts of a company are less secret than a sole trader or partnership.
5. The company cannot offer shares to the general public.

Question 7

Public limited companies (PLC):

Answer 7

these are businesses owned by shareholders but can sell shares to the public and their shares are tradable on the Stock Exchange.

Question 8

advantages of plc

Answer 8

• Limited liability to shareholders
• It’s an incorporated business
• Can raise very large amounts of capital by selling shares to the public.
• No restrictions of buying, selling or transferring shares. •Business will have a high status and should find it easy to borrow money, and purchase goods on trade credit.