The Private Sector

Question 1

Features of Private Limited Companies

Answer 1

Owned by shareholders
Controlled by a board of directors
Financed by each shareholders individual investment

Question 2

Advantages of Private Limited Companies

Answer 2

• Ownership is not lost to outsiders
• Owners have limited liability
• The business usually retains a close, tight-knit friendly feel with a high level of customer service.
• Expertise and business acumen can be gained from an experienced board of directors.

Question 3

Disadvantages of a Private Limited Companies

Answer 3

• Profits have to be split between many shareholders by issuing dividends.
• A complicated legal process is required to set up the business.
• A limited source of capital is available as shares are not sold publicly
• Financial statements have to be shared with Companies House (and therefore made publicly available) meaning profits are not kept private.

Question 4

Features of Public Limited Companies

Question 5

Advantages of Public Limited Companies

Answer 5

• Shareholders have limited liability
• Large amounts of finance can be raised through the public sale of shares
• It is easy to borrow finance due to a PLC’s size and reputation so less risk for banks.
• PLC’s can easily dominate the market

Question 6

Disadvantages of Public Limited Companies

Answer 6

• Dividends are shared with many shareholders
• Control of the business can be lost as anyone can buy shares on the stock market
• Annual accounts have to be published
• Setting up a PLC is costly and complicated.

Question 7

Describe a franchise

Answer 7

A franchise is a business model that allows businesses to pay a sum of money to own a branch of a well-known existing business.