Entrepreneurs and Leaders 1.5

Question 1

What is an unincorporated business?

Answer 1

Owner is the business, unlimited liability

Question 2

What is an incorporated business?

Answer 2

Legal difference between the business + owners, separate legal identity

Question 3

What is unlimited liability?

Answer 3

Owner of the business is personally responsible for all debts
- Assets may be used to pay off debts

Question 4

What is a sole trader?

Answer 4

• Owns + runs business
• Registered as self employed
• Required to keep record of income
• Profit classed as income, so need to be taxed
• Unlimited liability

Question 5

What are the advantages of being a sole trader?

Answer 5

1. Gets all the profit
2. Don’t need to write documents
3. Keep control of business
4. Easier to set up

Question 6

What are the disadvantages of being a sole trader?

Answer 6

1. Unlimited liability
2. Potentially pay more tax
3. Less ideas
4. No income if not working

Question 7

What is a partnership?

Answer 7

Two+ people share the costs, risks, responsibility of business
- Register as self employed
- Partners share profit

Question 8

What are the benefits of partnerships?

Answer 8

1. Risks, costs, responsibility shared
2. Scope for specialist skills
3. Financial records remain private
4. More capital raised

Question 9

What are the disadvantages of partnerships?

Answer 9

1. Unlimited liability
2. Arguments with decision making
3. Partnership dissolved if partner dies
4. Trust is a big element

Question 10

What is limited liability?

Answer 10

Shareholders can only lose the value of their investment in the share capital of the company

Question 11

What are the disadvantages of becoming a company?

Answer 11

1. Need to make documents
2. Must register with companies house

Question 12

What are the advantages of becoming a company?

Answer 12

1. Own legal identity separate from owners
2. Responsible for its own debt (limited liability)

Question 13

What do companies need to do?

Answer 13

1. Pay to have accounts checked annually
2. Make company account public

Question 14

What is a private limited company (LTD)?

Answer 14

• Cheap to set up (£15)
• Limited liability
• Owners place restrictions on who shares are sold to

Question 15

What are the advantages of a private limited company?

Answer 15

1. Limited liability
2. Easier to raise finance
3. Stable form of structure

Question 16

What are the disadvantages of a private limited company?

Answer 16

1. Greater administration cost
2. Public disclosure of info
3. Directors’ legal duties

Question 17

What is a public limited company (PLC)?

Answer 17

• Shares traded publicly
• Minimum capital requirement= £50,000

Question 18

What is market capitalisation?

Answer 18

Total value of all the issued shares in a PLC

Question 19

What is the market capitalisation equation?

Answer 19

share price x number of shares issued

Question 20

What are the advantages of trading as a private limited company?

Answer 20

1. Access to capital
2. Publicity
3. Ability to take over other companies

Question 21

What is a franchise?

Answer 21

Franchisor grants a license to another business to allow it trade using brand/ business format

Question 22

What are the benefits for a franchisor?

Answer 22

1. Accelerate growth of service
2. Rapid geographical growth for minimum investment
3. Option to open solus branches

Question 23

What are the benefits for franchisee?

Answer 23

1. Still own business
2. Advice, support, learning
3. Easier to raise finance
4. Lower risk

Question 24

What are the drawbacks for franchisee?

Answer 24

1. Not cheap
2. Restrictions on actions
3. Problem selling business on
4. Long term rewards of hard work

Question 25

What is a not-for-profit organisation?

Answer 25

Businesses trade in order to benefit the community
- Have social aims

Question 26

What is a lifestyle business?

Answer 26

Business that generates a living for the owners

Question 27

What is an online business?

Answer 27

Internet allows firms to connect with consumers effectively without meeting face to face

Question 28

What is a public sector organisation?

Answer 28

Companies owned or controlled by the Gov