Forms of Business

Question 1

What are some forms of business?

Answer 1

• Sole Trader
• Partnership
• Companies
• Public Limited
• Co-operatives
• Franchises

Question 2

Characteristics of a sole trader?

Answer 2

• Owned & operated by 1 person
  (but can have other employees)
• Owner and the business are treated as 1 person i.e. the owner has unlimited liability and will lose personal savings if the business goes bankrupt
• Small business which is easy to start
• Very little capital needed
• Little to no legal requirements to get started (only business registration)
• One person enjoys all the profits and bears all the risk

Question 3

What are some advantages of a sole trader?

Answer 3

• Easy to form since there are no legal requirements
• No need to disclose business affairs to anyone
• Speedy decision making

Question 4

What are some disadvantages of a sole trader?

Answer 4

• Long working hrs
• Lack of continuity
• Limited managerial skills
• Problemraisingcapital
• Unlimited liability

Question 5

What are some advantages of a partnership?

Answer 5

• Easy to form & manage
• Easier to raise capital than sole
• Shared liability and decision making

Question 6

What are some disadvantages of a partnership?

Answer 6

• Unlimited liability
• Lack of continuity trader
• Slow decision making
• Decisionof1bindsall

Question 7

What are some advantages of a company?

Answer 7

• Limited liability
• Shared workload
• Continuity
• Incorporated
• More capital

Question 8

What are some disadvantages of a company?

Answer 8

• Not allowed to sell shares to the public
• Slow decision making

Question 9

What are some advantages of a public limited?

Answer 9

• Easy to raise capital by issuing shares
• Same as private limited

Question 10

What are some disadvantages of a public limited?

Answer 10

• Possible takeover since shares are easily transferred
• Personal element is lost due to size
• Audited accountsmustbekept

Question 11

What are some advantages of a co-operative?

Answer 11

• Pooling resources
• Members can borrow from society
• Loans offered at minimal rates
• Members receive dividends on shares
• Members have a sayindecision

Question 12

What are some disadvantages of a co-operative?

Answer 12

• Profit making is hard
• Members lack expertise
• Profit making is hard

Question 13

What are some advantages of a franchise?

Answer 13

Training & marketing provided for Royalties must be paid which can
- Training & marketing provided for owner

• Owner benefits from business’ good name & reputation
• Owner gains expertisefromfranchisor

owner

be costly

Owner benefits from business’

Little room for creativity since a

good name & reputation

manual must be followed

Owner gains expertisefromfranchisor

Question 14

What are some disadvantages of a franchise?

Answer 14

• Royalties must be paid which can be costly

Owner benefits from business’

Little room for creativity since a manual must be followed

Question 15

Characteristics of a Partnership

Answer 15

• Owned and operated by 2 – 20 partners
• No legal requirements
• Partnership deed usually guides its operations
• Without a deed profits and losses are shared equally
• Unlimited liability unless a limited partner

Question 16

Characteristics of a company

Answer 16

• Private Limited
• 2 – 50 members restricted to close friends and family
• Must be incorporated (separate legal entity)
• Managed by owners and persons appointed by owners
• Ltd must be in the title

Question 17

Characteristics of a Co-operative

Answer 17

• Types include producer, buyer, retail/consumer, workers and financial
• Governed by members through a board elected annually
• Pooling of funds
• Voluntary, non-profit organization

Question 18

Characteristics of a franchise

Answer 18

• Operating via a license giving them permission to trade under an existing name
• Royalties paid to the franchisor by the franchisee