Forms of Business Ownership

Question 1

what are the 4 types of public sector businesses?

Answer 1

sole trader

partnership

companies

franchises

Question 2

what is unlimited liability?

Answer 2

where the owners of business are liabvle for all the debts that the business may incur

personal assets are at risk

Question 3

what is limited liability?

Answer 3

where the liability of thr owners for the debts of the business is limited

personal properties are safe

Question 4

what is an unincorporated business?

Answer 4

there is no distinction in law between the individual owner of the business and the business itself

Question 5

what is an incorporated business?

Answer 5

the business has a legal identity that is serperate from the individual owners

Question 6

what is body corporate

Answer 6

has a legal existance quite seperate from that of its owners

Question 7

what is legal entity?

Answer 7

body corporate is a legal entity

Question 8

what is continuity of existance?

Answer 8

a partnership or sole trader dont have this as is sole tarder dies the business dissolves

if a shareholder dies, the shares are bequeathed to someone else and contiues uneffected

Question 9

what is a sole trader?

Answer 9

a business fully owned by one perosn who has complete control

Question 10

advantages of sole trader

Answer 10

owner takes all the profits

good motivation

simplest form of organisation

total control

owner has secrecy

great personal satisfaction

have close contacts with customers

entitled to government assitance

Question 11

disadvantages of sole trader

Answer 11

limited sources of finance for the business

borrowwing money can be a problem as sole tarders lack collateral

limited oppourtunites of sconomies of scale

unlimited liability

no legal continuity of existance

rely on the ability and drive of one person

Question 12

what is a partnership?

Answer 12

the joint owners will share responsability from running the business and also share profits

in a partnership their is always more than one owner

Question 13

advantages of partnership

Answer 13

increased finance available

easier to borrow money

increase in specialisation

variety of skills and abilites

the accounts of the business may be kept private

a few legal formailites

low start up costs

losses are shared

Question 14

disadvantages of partnership

Answer 14

unlimited liability

requires a great deal of trust. loss in autonomy

actions of one partner is completly binding on all others

partners may get into a dispute

no legal continuity of existance

Question 15

what is something a partnership may draw up on?

Answer 15

deed of partnership

e.g.
the trading name and function
how much capital each partner will contribute
how profits will be shared amonst partners

Question 16

how is the capital of a limited company is divided into shares?

Answer 16

each member owns a number of these shares

they are joint owners of the company and can vote and take a share of the profits, this share is called a dividend

those with more shares can take more control and enjoy more capital

Question 17

what are the two types of documents drawn up when forming a limited company?

Answer 17

memorandum of assocation

articles of association

Question 18

what is a memorandum of association

Answer 18

it establishes the relationship that the company has with the outside world

it gives:
the offical name of company
the fact that its a plc or an ltd
basic structure and onjectives
liabilty of its members
the amount authorised as share capital

Question 19

what is articles or association?

Answer 19

refers to the internal managment of the company

give information on issues such as:
the voting rights of share holders
the role and duties of directors
issing for dividends
rules of board meetings

Question 20

what is the birth certificate of business?

Answer 20

the cetificate of incoporation

Question 21

what is a private limited company?

Answer 21

small to medium sized business that is usually run by a family or a small group of individuals

Question 22

advanatges of private limited company

Answer 22

limited liabilty

more oppourtunity for rasing capital

easier to borrow money

seperate legal entity

body coporate

more status, easier to get trad e credit

workload can be shared, better descision making

cannot become the target for a hostile takover

Question 23

disadvantages of a private limited company

Answer 23

profits have to be shared out

time consuming and expensive

open for inspectioin by public

find it more difficult to raise capital necessary to finance expansion and growth

Question 24

what is a public limited company?

Answer 24

a larger business with share capital of over 50,000. have a wide spread of share holders as shares can be bought and sold by members of the public stock exchange

Question 25

advanatges of public limited company

Answer 25

limited liabilty

more oppourtunity for raising capital

easier to borrow money

sepertae legal entity

more staus, easier to get trade credit

economies of scal;e

specilisation of staff

Question 26

disadvantages of public limited company

Answer 26

profits have to be shared

time consuming and expensive

accounts of a registed comapny are open to the public, less secrecy

more stringent

founders of a business will not have as much influence on the business

these companies are always under pressure by share holders to return good profit

vunerable to being taken over by other organisations

Question 27

what is franchising?

Answer 27

the right to trade under another businesses name

Question 28

what are the two main types of franchising agreements?

Answer 28

business format franchising

product and trade-name franchising

Question 29

advantages to the franchisee

Answer 29

already proved to be a successful elsewhere, increased security

established reputation

franchiser may train the new franshiee

franchiser may provide a graet deal of assistance in setting up the new franchise

bank will more readily loan them money to start up a franchise business

national advertising, marketing economies of scale

franchiser may carry out research and development for all franchisee businesses

Question 30

disadvanatges for a franchisee

Answer 30

will not have total control

badly damaged if another franchisee does something to ruin the reputation of the franchise name

franchisee business could also be damaged by a mistake of the part of the franchiser

many franchsiers take a small percentage of the profits which is called royalties

cannot sell franchisee unless they have permisson from franchisor

Question 31

advantgaes of franchisor

Answer 31

the business name can be expanded without having to risk his own capital, rapid should allow for economies of scale

take a regular small share of the profits of the franchisee, less administration for franchisor

Question 32

disadvantages for franchiser

Answer 32

a mistake about franchisee choice if they run the business badly, the franchisor has reduced control over the business name and reputation

when firms grow quickly they can experience problems such as a result of trying to manage an organisation that is simply too big known as diseconomies of scale

Question 33

what is a social enterprise?

Answer 33

business which has social aims and reinvests a large proportion of its profits into the community. a social enterprise makes its money in a socially responsible way.

not to be confused with charity

their mission is social and they achieve it by selling products or services

Question 34

why are social enter[prises important?

Answer 34

te have ethical purposes but use a market- based business model, its not for personal benefit but financally self-sustaining

helping the economy, incraesing the amount of wages and salaries in economy

offer on-the-job training to people who lack skills, job oppourtunites for people with disabilites