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Question 1

define unlimited liability

Answer 1

unlimited liability requires business owners to be fully responsible of the business’ financial loss such as debts with their personal assets

Question 2

define limited liability

Answer 2

limited liability refers ti when business owners are only personally responsible by law to the level of their original investment in the business, hence are not personally responsible by any financial loss.

Question 3

define sole trader

Answer 3

a sole trader is a business owned by a single individual

Question 4

what are sole traders’ legal liability?

Answer 4

unlimited liability as they is one staff member to be responsible for the business’ financial loss, hence owners have to pay off all debts incurred by the business

Question 5

advantages of sole traders

Answer 5

• simple and inexpensive to establish as large offices and establishments are not required to be obtained, nor recruitment costs.
• owner is able to keep all the profits as there are no shareholders
  -there is minimal government regulation as they are not required to comply to laws valid to public businesses such as releasing financial reports

Question 6

disadvantages of sole traders

Answer 6

• unlimited liability for the owner, hence if any financial loss such as debts are incurred, the owner must be responsible via their personal assets
• harder for owner to obtain finance for the business as investments form others or shareholders are not present
• reliant on the knowledge and skills of the owner as there are no individuals to provide their own experience and opinions towards the business

Question 7

define partnership

Answer 7

a business owned and operated by 2-20 people

Question 8

what is the legal liability of partnership businesses

Answer 8

unlimited liability

Question 9

define perpetuity

Answer 9

the property of lasting forever

Question 10

perpetuity of partnership businesses

Answer 10

partnerships have no perpetuity as if a partner leaves a business, the business cannot operate until a new partnership is formed

Question 11

advantages of partnerships

Answer 11

• simple and inexpensive to set up
  -risk and workload is shared between partners
• minimal government regulation as they are less strict laws the owners are compelled to abide by.
• broader access to capital, knowledge, skills and expertise as there are more individuals from varying backgrounds to input their perspectives into the business.

Question 12

disadvantage of partnership

Answer 12

• unlimited liability
• owner may be liable for debts incurred by partner
• business could be threatened by one partner leaving due to no perpetuity
• potential for disputes and conflict within personality

Question 13

define private limited company

Answer 13

a business with 1-50 shareholders

Question 14

advantages of private limited company

Answer 14

• limited liability
• extra capital can be obtained by issuing more shares
• existence not threatened by death or removal of one of the share holders (perpetuity)

Question 15

disadvantages of private limited company

Answer 15

• highly complex structure
• high establishment costs
• needs more accountability and compliance paperwork
  -additional compliance costs

Question 16

define public listed company

Answer 16

a business with an unlimited number of shareholders

Question 17

advantage of public listed company

Answer 17

• limited liability
• ability to gain extra capital through selling extra shares
• seperate legal entity
• existence not threatened by death or removal of one of the shareholders (perpetuity)

Question 18

disadvantages of public listed company

Answer 18

• highly complex structure
• high establishment costs
• needs more accountability and compliance paperwork
• must declare financial information to public

Question 19

define social enterprise

Answer 19

social enterprise is a private sector business that distributes surplus funds to fulfil a social need.

Question 20

define government business enterprise

Answer 20

a business that is government owned and operated

Question 21

what is the main objective of a gbe

Answer 21

to provide a service

Question 22

where do the profits from the gbe go to

Answer 22

the government

Question 23

advantages of a gbe

Answer 23

-the money has significant money to invest in these businesses so they have large amounts of funding to exist
-provides health competition to private sector

Question 24

disadvantages of gbe

Answer 24

• strategic directions can change with changing governments
• may be inefficiencies caused by the government issues such as politician and president changes

Question 25

advantages of social enterprise

Answer 25

-beneficial for the community as it gives back to them and fulfils a social need - prone to develop good reputation due to business objectives, hence increases sales. - can open new markets as consumers may want to expand on the good or service offered by the business.

Question 26

disadvantages of social enterprise

Answer 26

-significant operation costs, hence hard to operate and maintain from long periods of time -capital is hard to obtain and may be inefficient to pay for employees due to profit not being guaranteed -can be difficult to achieve both social and financial goals