Legal Structure

Question 0

Characteristics or public sector businesses

Answer 0

• Organisations that are owned by the public
• Controlled by the government
• Not run for profit
• Usually services
• Example: hospital, school, police etc.

Question 1

What are the 2 sectors businesses are divided into

Answer 1

Public sector

Private sector

Question 2

Characteristics of private sector businesses

Answer 2

• Organisations that are privately owned
• Controlled by private individuals or groups
• Usually run for profit

•A high percentage of businesses are
in the private sector

•Example: Restaurants, supermarkets,
shops etc.

Question 3

What are the 6 sections of the private sector

Answer 3

Sole trader
Partnership
Private limited company
Franchise
Public limited company
Co-operatives

Question 4

Sole trader

Answer 4

•Usually a small business within the private sector
•Owned by one person
Eg. •Plumbers, window cleaners, local shops, electricians etc.
. Unincorporated

Question 5

Characteristics of a sole trader

Answer 5

What is a sole trader?
•Usually a small business within the private sector
•Owned by one person
•Controlled by the owner
•Managed by the owner
•Unlimited liability
•Finance is raised through personal savings, borrowing from friends and family or a bank loan
•All of the profit goes to the owner

Question 6

Unlimited liability

Answer 6

• the owner is responsible for all of the debts of the business
• This means that if the business loses money, then the owner must pay the debts with their personal wealth

Question 7

Partnership

Answer 7

• Usually a small business within the private sector
• has between 2 and 20 owners
• Examples: doctors, dentists, accountants

Question 8

Characteristics of a partnership

Answer 8

•Owned and managed by the partners
•Finance is raised by the partners through savings and borrowing
•All of the profit goes to the partners
.unincorporated

Question 9

Deed of partnership

Answer 9

• Legal contract between the partners
• States £ that each of them get
• States £ that each of them invest
• What they have to do within the business
• Silent partners

Question 10

Limited company

Answer 10

.2 types – public and private

•These are larger businesses which are more expensive to set up.

Question 11

Key features of a limited company

Answer 11

• Owned by shareholders
• Controlled by a Board of Directors
• Managed by appointed Managers
• Finance is raised through selling shares and borrowing from banks
• Profits go to shareholders (dividends)
• Limited liability

Question 12

Limited liability

Answer 12

• Shareholders only lose the amount of money that they have invested in the company (shares)
• Personal possessions are not at risk

Question 13

Incorporated

Answer 13

• Incorporated – This creates a legal entity, something that exists as far as the law is concerned.
• For example – if J. Smith is a sole trader and the business accumulates debts, or is sued by a customer, then it is J. Smith who will appear in court.
• If the business is J. Smith Ltd then it is the business that appears in court.

Question 14

Shareholders

Answer 14

• People who invest money in a company
• They buy shares in and become part owners of the company
• They get a share of the profits each year called a dividend
• The amount of dividend depends on how well the company is doing and how many shares they have

Question 15

Private limited company

Answer 15

• Has the letters Ltd after its name.
• Shares can only be sold privately.
• This means that you must be invited to become shareholders.

Question 16

Public limited company

Answer 16

• Has the letters plc. after its name.
• Shares are bought and sold on the Stock Market.
• This means that they are available to the public and anyone can buy shares.

Question 17

Advantages of a private limited company

Answer 17

. You can raise large sums of money.
. Limited Liability.
. You can choose who you want to be your shareholders.

Question 18

Disadvantages of a private limited company

Answer 18

. The people you sell your shares to may not be the wealthiest.
. You often sell to friends and family, so if the business does not do well you could have problems.

Question 19

Advantages of a public limited business

Answer 19

. You can raise large sums of money.
. Limited Liability.
. Anyone can buy your shares, so you can possibly make more money.

Question 20

Disadvantages of a public limited company

Answer 20

. Controlled by people you might not know.

. They can sell their shares at any time.

Question 21

The 2 types of co operatives

Answer 21

. Worker owned

. Customer owned (retail)

Question 22

Advantages of co operatives

Answer 22

. United cause for the workers (or customers) than the profit of shareholders.
. Workers at John Lewis can earn up to 20% of salary in bonus.
. Co-op focusses on ethical trading and customers get dividends.

Question 23

Disadvantages of co operatives

Answer 23

One vote per member can mean a long drawn out process.
Raising finance can be more difficult as banks reluctant to lend (profit not main objective)
May not lead to profit in the long run.