Types of Business

Question 1

3 Benefits & 3 drawbacks of sole trader?

Answer 1

Benefits:

• don’t have to argue with partners
• can keep all of profit
• not many legal requirements

Drawbacks:

• limited access to finance
• heavy workload
• unlimited liability

Question 2

What’s a partnership? What are 2 advantages and drawbacks?

Answer 2

Business owned or run by 2+ people.
Benefits:
-workload is shared
- more access to finance
Drawbacks:
- unlimited liability 
- arguments about decisions

Question 3

What is a deed of partnership?

What does it include?

Answer 3

Contract that sets out rules of partnership. It includes:

• names of partners
• responsibilities of each person
• how profit is split
• procedure for removing partners
• investment history of partners

Question 4

What’s the difference between a private limited company and a public limited company??

Answer 4

Public limited companies can sell shares to any member of the public but a private limited company can only sell shares to family and friends.

Question 5

What does the memorandum of association include?

Answer 5

• company name
• address of office
• company purpose
• shareholders have limited liability

Question 6

What’s a franchise?

Answer 6

When an already up and running company sells the rights to use it’s products / brand name & logo / services.

Question 7

Franchise: 3 benefits? 3 drawbacks?

Answer 7

Benefits: 
- a tried and tested business idea 
- already established name 
- reduced risk of failure 
Drawbacks:
- all supplies must come from franchiser at the prices they determine
- losses have to be paid by franchise
- expensive!!

Question 8

For a company to become a public LTD company it must…?

Answer 8

Have an issues share capital in excess of £50,000

Question 9

What is an unincorporated business? Incorporated business?

Answer 9

Unincorporated - a business and it’s owner are seen as a single legal entity

Incorporated - a business is set up as a separate legal entity to owner

Question 10

What’s a multinational company?

Answer 10

A company with production and sales occurring in 3+ countries.

Question 11

Multinational company: 5 benefits? 5 drawbacks?

Answer 11

Benefits 
- larger audience / market 
- cheap labour in some countries
- cheap land & raw materials 
- lower transport costs
- increase in sales 
Drawbacks
- language barriers
- different cultures 
- communication issues
- adapt product for different countries
- difficult to control

Question 12

Public corporations are…?

Answer 12

Services provided by government:

• schools
• hospitals
• army / navy
• prisons
• roads
• council houses

Question 13

What’s a cooperative business?

Answer 13

where the employees own or are involved in the business

Question 14

What’s a sole trader?

Answer 14

A business owned by one individual who may employ others to work for them.