Forms of Business

Question 1

What are the drawbacks of franchises?

Answer 1

• Limited creative opportunities.
• You’re your own boss, but you have less individual control.
• Financial information is shared with the franchisor.

Question 2

What are lifestyle businesses?

Answer 2

Lifestyle businesses are passion centred companies built by entrepreneurs who want life to come first and work to come second.

Question 3

What are partners with limited liability called?

Answer 3

Sleeping partners.

Question 4

What are the advantages of being a sole trader?

Answer 4

• No paperwork required to register.
• Decisions can be made very quickly.
• The owner keeps all the profit.

Question 5

What are the advantages of partnerships?

Answer 5

• More owners bring more capital to invest at start-up.
• Partners can bring more ideas and expertise.
• Partners can cover during holidays or illnesses.

Question 6

What are the benefits of franchises?

Answer 6

• Ongoing business support.
• Market expertise.
• Reduced risk of failure.
• Higher profits.

Question 7

What are the disadvantages of being a sole trader?

Answer 7

• It can take a long time to establish yourself.
• Unlimited liabilities in case of problems.
• Difficult to raise finance to expand.

Question 8

What are the drawbacks of partnerships?

Answer 8

• Partners still have unlimited liability.
• Each partner is liable for decisions made by other partners.
• Theres a risk of conflict between partners.

Question 9

What are the roles and rights of a shareholder?

Answer 9

• Declaring a dividend.
• Right to attend the AGM.
• Right to inspect corporate documents.

Question 10

What can/can’t sleeping partners do?

Answer 10

• Can invest money into the business.
• Can’t run the business.

Question 11

What does IPO stand for?

Answer 11

Initial public offering.

Question 12

What does limited partnerships do?

Answer 12

It allows partners to claim limited liabilities for some of its partners.

Question 13

What is a franchise?

Answer 13

A franchise is a type of licence that grants a franchisee access to a franchisor’s proprietary business knowledge, processes and trademarks.

Question 14

What is a shareholder?

Answer 14

A person who owns a share in a company’s stock.

Question 15

What is an IPO?

Answer 15

An IPO is where a privately owned company lists its shares on a stock exchange, making them available for purchase by the general public.

Question 16

What is the deed of partnership?

Answer 16

A legal document that contains an agreement stating the profit sharing of the business will remain the same unless both are in agreement of its alteration.

Question 17

What is unlimited liability?

Answer 17

A feature of unincorporated business where the owners are personally liable for all debts incurred by a business. All sole traders and most partnerships have unlimited liability.

Question 18

Why is the deed of partnership good?

Answer 18

Incase of argument one partner may try to take a larger share of the profit, this would be impossible and illegal if the deed was signed.