Theme 1 Topic 3 - Forms of Ownership

Question 1

Define Unincorporated Business

Answer 1

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

Question 2

What are two examples of unincorporated businesses?

Answer 2

Sole Traders and Partnerships

Question 3

Define Incorporated Business

Answer 3

This has a legal identity that is separate from the individual owners

Question 4

What are two examples of incorporated businesses?

Answer 4

Private Limited Companies and Public Limited Companies

Question 5

Define Unlimited Liability

Answer 5

The owners of a business are liable for all the debts that the business may incur

Question 6

Define Limited Liability

Answer 6

The shareholders of a business have no responsibility for paying the debts incurred by their business as long as they have paid in full for the shares they have purchased

Question 7

Define Sole Trader

Answer 7

A business owned by one person, who may operate on their own or may employ other people

Question 8

What are two advantages of being a sole trader?

Answer 8

Keep all profits, Keep all control

Question 9

What are two disadvantages of being a sole trader?

Answer 9

Little capital for expansion, Unlimited liability

Question 10

Define Partnership

Answer 10

Two or more people operate for the common goal of making a profit

Question 11

What are two advantages of being a partnership?

Answer 11

More than one person invests in the business, Can have limited liability if they are a sleeping partner or its a Limited Liability Partnership

Question 12

What are two disadvantages of being a partnership?

Answer 12

Usually have unlimited liability, Have to share profits and control

Question 13

Define Private Limited Company (Ltd)

Answer 13

A company owned by shareholders who were invited to buy a share and invest capital in the business

Question 14

What are two advantages of being an Ltd?

Answer 14

Limited liability, Raise finance through sale of shares

Question 15

What are two disadvantages of being an Ltd?

Answer 15

Less control over decision making, Have to share profits

Question 16

Define Private Limited Company (Plc)

Answer 16

The shares are sold on the stock exchange which means anyone can buy a share

Question 17

What are two advantages of being a Plc?

Answer 17

Quick way to raise finance through selling shares on the stock exchange, Limited liability

Question 18

What are two disadvantages of being a Plc?

Answer 18

Little privacy, May lose control if too many shares are bought by one person

Question 19

Define Lifestyle Business

Answer 19

Some entrepreneurs start a business based on their personal needs and wants

Question 20

Define Online Business

Answer 20

Internet allows firms to set up with low capital outlay

Question 21

Define Social Enterprises

Answer 21

These firms have a social mission - they exist for the good of society rather than making profits

Question 22

Define Franchise

Answer 22

A license to use a business format of another firm

Question 23

Define Franchisee

Answer 23

A business that pays royalties for the right to use the format and brand of another firm

Question 24

What are two advantages of being a franchisee?

Answer 24

Advertising and training paid for, Established brand/product

Question 25

What are two disadvantages of being a franchisee?

Answer 25

No space for entrepreneurial ideas/creativity, Have pay royalties

Question 26

Define Franchisor

Answer 26

A business that allows other firms to use its brand and format in exchange for royalty fees

Question 27

What are two advantages of being a franchisor?

Answer 27

Gets paid royalty, Cheap way to expand/distribute more

Question 28

What are two disadvantages of being a franchisor?

Answer 28

Actions of franchisee reflect on franchisor, Have to pay for all advertising/training