Ownership Structures

Question 1

What’s a sole trader?

Answer 1

A business owned by one person

Question 2

Advantages of a sole trader

Answer 2

Simple and easy to set up
You’re your boss- choose your hours
You alone get profit
Small start up cost- little capital needed

Question 3

Disadvantages of a sole trader

Answer 3

Unlimited liability
Likely to work long hours- stressful
Often hard to raise capital

Question 4

What’s unlimited liability?

Answer 4

Being personally responsible for the debts, as the business doesn’t have separate legal existence to the owner

Question 5

What’s a partnership?

Answer 5

Where 2 to 20 people own a business

Question 6

Advantages of partnerships

Answer 6

More ideas- more people (shared expertise)
More capital
Less hours- more people

Question 7

Disadvantages of partnerships

Answer 7

Unlimited liability
Disagreements between owners
Each partner is legally responsible for what the other partners do

Question 8

What’s a PLC (public limited company)?

Answer 8

A company where anyone can buy shares on the stock exchange

Question 9

Advantages of a PLC

Answer 9

Easy capital
Can expand more quickly
Lots of publicity buy being on the stock exchange
Incorporated

Question 10

Disadvantages of a PLC

Answer 10

Shareholders have little say in the company
Anyone could buy the majority of shares- gain control
Dividends have to be paid from profits
Have to have £50K to get on the stock exchange
Financial information can be obtained

Question 11

What’s a LTD (private limited company)?

Answer 11

A company where shares are sold privately, to who the company wants

Question 12

Advantages of a LTD

Answer 12

Limited liability
Being incorporated- can trade after owner dies
Can raise a lot of capital
Incorporated

Question 13

Disadvantages of a LTD

Answer 13

Expensive to set up compared to partnerships- legal paperwork
Legally obliged to publish accounts
All shareholders must agree to sell a share to someone

Question 14

What’s a public corporation?

Answer 14

An organisation owned by the government

Question 15

What’s a co-operative?

Answer 15

A business owned and controlled equally by the people who use its services or by the people who work there

Question 16

What is a deed of partnership?

Answer 16

A legal document stating the responsibilities of partners ie how profits and losses are distributed

Question 17

What’s a franchise?

Answer 17

When someone buys into an existing business and acquires the right to use an existing brand name, and all their ideas

Question 18

What’s a franchisee?

Answer 18

The person who buys the right from a franchisor to copy the business format

Question 19

What’s a franchisor?

Answer 19

The person who sells the right to use a business idea in a particular location

Question 20

What’s a benefit to having a franchise?

Answer 20

Less risky than setting up your own business

Well-known product and brand= lots of sales

Question 21

What’s a problem of having a franchise?

Answer 21

You have less control over what happens to it

Have to pay part of the profit as a royalty payment

Question 22

What’s good about a co-operative?

Answer 22

Everyone has an equal say no matter how many shares they own- democratic

Question 23

What’s the main objective of a public-corporation?

Answer 23

To provide a good service for customers- NOT to make a profit

Question 24

What’s a multinational corporation?

Answer 24

One that operates in several countries

Question 25

What’s good about a multinational corporation (for them)?

Answer 25

Cheap raw materials
Cheap labour
Friendly government policies

Question 26

What’s bad about multinational corporations (for the public)?

Answer 26

They push smaller firms out of the market
Slave labour
Pollution

Question 27

What does incorporated mean?

Answer 27

A company has their own legal identity and can sue or own assets in their own right

Question 28

What type of businesses are incorporated?

Answer 28

PLC and LTD