Types Of Business

Question 1

Name the three sectors of economy

Answer 1

Private sector
Public sector
Third sector

Question 2

Describe the private sector.

Answer 2

Private sector organisations are owned by individuals, these businesses are driven by profit

Question 3

Profit from private sector organisations benefit who?

Answer 3

The owners, stakeholders and investors.

Question 4

How are private sector organisations financed?

Answer 4

They are financed by private money from shareholders and by bank loans.

Question 5

Describe the public sector.

Answer 5

Public sector organisations are owned by the government. They provide goods and services for the benefit of the community.

Question 6

How are public sector organisations run?

Answer 6

They are run by the government and financed with money raised from taxes.

Question 7

Describe the third sector.

Answer 7

Third sector organisations are owned and run voluntarily by trustees. These are not run by the need to make a profit but to help the community.

Question 8

How are third sector organisations run?

Answer 8

Third sector organisations operate with money from donations and gifts. Any profits are reinvested in the organisation.

Third sector organisations can also be run as a social enterprise.

Question 9

What are the most common types of ownership in the private sector?

Answer 9

Sole trader
Partnership
Private limited company

Question 10

Describe a sole trader

Answer 10

A sole trader is a business owner by one person. These are usually small in size and rely on their own saving or loans from bank or family and friend to finance the business

Question 11

Name some examples of sole trader

Answer 11

Hairdressers, butchers and electricians often operate as sole traders.

Question 12

Name the advantages of a sole trader

Answer 12

Sole traders keep all the profit they have for themselves and make all the decisions by themselves

Starting up as a sole trader is legally the easiest as it has less rules and regulations than other types of organisations.

Question 13

Name the disadvantages of sole trader

Answer 13

Sole workers have a heavy workload and shoulder the full burden of responsibility for their business.

Sole traders have unlimited liability

Sole traders have limited finance access as this type of business can be seen as risky to investors

Question 14

Describe a partnership

Answer 14

Partnerships can have a minimum of 2 and a maximum of 20 partners.
A partnership is set up by th deed of partnership document.

Question 15

What is the deed of partnership document?

Answer 15

It is a document which sets out the terms of the partnership. Eg how much money each partner invested and what role they each have.

Question 16

Name examples of partnership

Answer 16

Lawyers, estate agents, doctor and dental practices all often operate as partnerships.

Question 17

What is a sleeping partner?

Answer 17

A partner who invests but is not involved in the day to day running of the partnership.

Question 18

Name advantages of a partnership

Answer 18

Different partners in the partnership will bring different skills to the business

Partners can share the workload and responsibilities of the business between them.

It is easier to raise finance for a partnership as banks are more likely to finance it.

Question 19

Name disadvantages of a partnership

Answer 19

Partnerships have unlimited liability and all partners are liable for the debts of the business.

The profit of the business is split between the partners

Partners may disagree about the future of the business.

Question 20

Describe a private limited company

Answer 20

A private limited company is a type of business which is separate from the people who own it. Its finances are separate from personal finances and the ownership is divided up into equal shares.
A limited company is private when its shares are not available to the public by being bought and sold on the stock exchange.

Question 21

What is a shareholder?

Answer 21

A shareholder is someone who owns one or more shares, shareholders don’t own the company they are investors in this separate.

Question 22

Name advantages of private limited company

Answer 22

Private limited companies have limited liability.

It is easier for a private limited company to raise money through the share issue of ordinary shares.

Profits are only shared between shareholders, they receive this as a dividend.

Question 23

Name disadvantages of private limited company.

Answer 23

Must be registered with the registrar of companies.

High set up costs

Harder to motivate and control workers.

Question 24

Describe a charity

Answer 24

A charity is an organisation set up for a specific cause.

Question 25

Describe a community group

Answer 25

Community groups provide a service for the people and are non profit, all profit goes to ensuring the organisation stays running

Question 26

Describe a social enterprise

Answer 26

A social enterprise is an organisation that exists to help the community but runs like a business. Profits are reinvested into the organisation.

Question 27

What is an entrepreneur?

Answer 27

An entrepreneur is the person who brings together the factors of production.

Question 28

Name 3 skills of an entrepreneur

Answer 28

Identifying a gap in the market
Risk taking
Communication
Determination
Marketing
Decision making
Leadership