Forms of Business (1.5.4)

Question 1

What are the forms of business?

Answer 1

-Sole Trader
-Partnership
-LTD
-PLC
-Franchise

Question 2

What is a Sole Trader?

Answer 2

A Sole Trader is a type of business structure that is unincorporated where an individual is the sole operator of the business. They have full control over all business decisions.

Question 3

Advantages of being a Sole Trader? (3 Advantages)

Answer 3

-Privacy
-Full Control
-All Profit

Question 4

Disadvantages of being a Sole Trader? (4 Disadvantages)

Answer 4

-Unlimited Liability
-Limited access to finance
-Poor work-life balance
-Less professional image

Question 5

What is a Partnership?

Answer 5

Unincorporated Legal arrangement that allows 2+ people share responsibility for a business. Partners share ownership, Profits, Work and potential losses.

Question 6

Advantages of being in a Partnership? (4 Advantages)

Answer 6

-Ease of set-up/Low-starting Costs
-Better credit rating
-Different skills/experience/ideas
-Can have a better work-life balance as can take time off

Question 7

Disadvantages of being in a Partnership? (4 Disadvantages)

Answer 7

-Unlimited Liability
-Can effect relationship between partners
-Potential conflict
-Have to share profit

Question 8

What is a Private Limited Company (LTD)?

Answer 8

Incorporated business where Selected trusted Shareholders instead of random shareholders. Doesn’t publicly trade shares and has a max of 50 shareholders. Most LTD’s are small businesses.

Question 9

Advantages of being a Private Limited Company? (4 Advantages)

Answer 9

-Less personal Liability risks than sole trader
-Reduced Taxation
-Access to funds
-Business name protection

Question 10

Disadvantages of being a Private Limited Company? (3 Disadvantages)

Answer 10

-Profit-sharing
-Taxes
-Lack of privacy

Question 11

What is a Public Limited Company (PLC)?

Answer 11

Incorporated business that can sell its shares to the general public. Similar to a LTD but has more legal and financial requirements.

Question 12

Advantages of being a Public Limited Company? (3 Advantages)

Answer 12

-Can raise more capital by selling shares to investors
-Limited Liability
-Transferable shares

Question 13

Disadvantages of being a Public Limited Company? (5 Disadvantages)

Answer 13

-Original owners loose control
-High costs to set up and run
-Risk of Takeover
-More regulations +Taxes
-Less privacy as public can see financial info

Question 14

What is a Franchise?

Answer 14

Type of business model where the owner of the business (franchisor) grants the right to use their business name, products and processes to another person (franchisee) in exchange for a fee.

Question 15

Advantages of being a Franchise? (3 Advantages)

Answer 15

-Little to no industry experience necessary
-existing customer Base + Brand
-Lower risk starting an entirely new business

Question 16

Disadvantages of being a Franchise? (5 Disadvantages)

Answer 16

-High initial investment
-Limited creativity
-Lack of privacy
-Decreased Profits
-Shared information

Question 17

What is Unlimited Liability?

Answer 17

When the business owner and business have the same legal identity which means the business debt will have to be paid with personal assets.

Question 18

What is Limited Liability?

Answer 18

When the business owner and business have a separate legal identity which means the business debt will be paid off by the business resources and not the personal assets of the owner.

Question 19

What is a Not-for-Profit Business?

Answer 19

-A business where all Profit goes to social causes. Still aim to make a profit to go towards their chosen cause.

Question 20

What are the two types of not-for-profit businesses?

Answer 20

Charities and Social Enterprises

Question 21

What is a Charity?

Answer 21

An organization set up to provide help and raise money for those in need.

Question 22

What is a Social Enterprise?

Answer 22

An organization whose main goal is promoting social or environmental welfare rather than making or maximizing profits.