Ownership Structure

Question 1

what are sole traders

Answer 1

-most popular form of business in uk
- run by an individual

Question 2

advantages of a sole trader

Answer 2

-easy to set up, as only have to inform inland revenue, not time consuming
-keep all the profits , can decide if put back into business or owners disposable income
-easy to run, owner has complete control over decision making

Question 3

disadvantages of sole trader

Answer 3

-unlimited liability, personal assets at risk
-problems in raising capital, not trustworthy to gain bank loan as easy as partnership
-lack of specialisation, only one individual so some area may require more ideas and skill specialisation

Question 4

what are partnerships

Answer 4

partnerships involve the joint ownership of a business between 2 and 20 people

Question 5

what is the deed of partnership agreement

Answer 5

outlines the terms and conditions, importance of showing roles of each partner

Question 6

advantages of deed of partnership

Answer 6

-helps to avoid confusion, as it clearly state’s individuals roles and what they have done with the business
-help to avoid conflict, as all is written down so can be referred to as both partners have agreed to it

Question 7

disadvantages of partnership

Answer 7

-capital can still be limited, still hard to get banks to loan as not trustworthy
- unlimited liability , personal assets are at risk
- death of partner, can result in complications of re establishing partnership

Question 8

what is an LTD

Answer 8

shares not sold to the public, shares are sold to whoever all shareholders ageee on

Question 9

what is an LTD

Answer 9

shares are shared only within the business and to people who all shareholders agree too

Question 10

advantages of LTD

Answer 10

-control is not lost, shared only shared if all shareholders agree
-tax advantages from owners
-limited liability, personal assets not at risk only the business assets

Question 11

disadvantages LTD

Answer 11

-shares not sold to public, loss of additional capital
- increased cost in stetting up
-financial information is published to public

Question 12

what is a PLC

Answer 12

shares can be sold to the public via the stock market

Question 13

advantages of PLC

Answer 13

-capital raised by selling shares to the public
-easier to access growth funds , most desirable ownership to loan too from banks
-limited liability, personal assets not at risk only the businesses assets

Question 14

disadvantages of PLC

Answer 14

-loss of control, shares sold to public
- more information published to the public than private
- increased cost in setting up
- increase of size so inefficient with cost and distance from customers

Question 15

what is a not for profit organisation?

Answer 15

• not for the outcome or profit
  -objectives are social and ethical

Question 16

what are charities?

Answer 16

• capital is raised by donations
  -the main objective is to go to a cause

Question 17

what are co-operatives?

Answer 17

-service or goods that benefits members
- e.g.) the big issue, homeless people selling a magazine in order to gain a legitimate income

Question 18

what is a social enterprise?

Answer 18

• commit to re-investing majority of profits and surpluses back into the business
• to achieve social/environmental objectives, fund social causes
  e.g.) restaurants training young offenders

Question 19

what is the difference between cooperatives and social enterprise?

Answer 19

A cooperative is typically defined as a business organisation that is democratically controlled and owned by its members and which works in the interest of its members. A social enterprise is generally perceived as a business organisation with a social mission, working in the interest of its community or client group.

Question 20

To what extent might the aims of a social enterprise such as Greenstream Flooring
differ from those of Public Limited Companies (PLCs)

Answer 20

The main aim of plc’s is to make a profit for their shareholders –which is distributed via
dividend payments.
* During difficult trading conditions this primary aim may be replaced by the need to
ensure the survival of the business, enabling profits to be made in the future when
trading conditions improve.
* Growth is another aim of plc’s – on occasions a significant proportion of any profit may
be re-invested into the business in order to achieve a larger or more efficient business.
Nonetheless, this is intended to produce greater dividends for shareholders in the long
run.
* A social enterprise has two main aims: - to achieve social, community or environmental
outcomes: and to earn revenue which it uses in order to pursue a mission which will
benefit society.
* In many ways Greensteam operates in a similar way to the plcs that it deals with – it
naturally wishes to survive during difficult trading conditions and it wants to grow as an
enterprise – reinvesting some surplus revenue back into the enterprise.
* It makes its money from selling goods in the open market, but reinvests a proportion of
its profits/surplus back into the local community. So, when Greenstream profits, society
profits - not shareholders.
* In terms of employment Greenstream aims to employ people who are typically excluded
from the mainstream economy and unlikely to attain employment elsewhere. When
employing workers, plcs will aim to employ those best suited and qualified to carry out
the task most cost effectively.
* Greenstream aims to have a positive impact on the environment by recycling materials
and redistributing them for use elsewhere. The fact that Greenstream sources its
materials from plc’s clearly demonstrates the difference in aims in relation to
environmental issues.