Types of business ownership

Question 1

Advantages of being a sole trader

Answer 1

• Flexible hours
• Can be your own boss
• Easy to set up
• Lower taxes
• Keep all profits
• Complete control of business

Question 2

Disadvantages of being a sole trader

Answer 2

• Unlimited liability
• No expertise from shareholders
• Long hours
• Difficult to expand

Question 3

Examples of sole traders

Answer 3

• Corner shops
• Plumbers
• Electricians
• Cleaners
• Photographers

Question 4

Advantages of a partnership

Answer 4

• Profits are shared as well as debts
• Have more expertise in business
• Split workload
• Easier to raise extra capital
• You can take holiday while other other partner runs business

Question 5

Disadvantages of a partnership

Answer 5

• If partner dies or goes bankrupt, partnership is dissolved
• Unlimited liability
• Partners can have disagreements over decisions

Question 6

Examples of partnerships

Answer 6

• Doctors
• Dentists
• Accountants
• Solicitors
• Vets

Question 7

Advantages of a private limited company

Answer 7

• Limited liability
• Easier to raise capital
• Can continue trading if partner dies
• Can expand by selling shares
• Friends and family can buy shares making them part owners

Question 8

Disadvantages of a private limited company

Answer 8

• Shares cannot be bought by public
• Have to be registered with Companies House
• Accounts have to be made public
• More difficult and expensive to set up

Question 9

Examples of private limited companies

Answer 9

• Virgin

- Eddie Stobart

Question 10

Advantages of a public limited company

Answer 10

• Shares can be bought on stock exchange
• Banks are more willing to lend money
• Easier to grow and expand by selling shares
• Limited liability

Question 11

Disadvantages of a public limited company

Answer 11

• Information is made public so business is more transparent
• More expensive to set up with more admin work
• Original owners can lose control and ownership of business
  Owners of business may have different aims than shareholders and therefore conflicts between stakeholders can arise
• Company can be taken over if a majority of shareholders agree to bid

Question 12

Examples of public limited companies

Answer 12

• Rolls Royce
• National Grid
• Tesco
• Sky
• HSBC
• Jaguar

Question 13

Advantages of franchising

Answer 13

• Anyone can become a franchisee
• Business growth is really fast
• Increased profitability
• Franchisee benefits from economies of scale
• Franchisee receives a lot training from franchisor

Question 14

Disadvantages of franchising

Answer 14

• Franchisee must go through a lengthy interview process to get the job
• Franchisee must pay initial fee and ongoing royalties to franchisor
• Opening up a franchise is very expensive
• Franchisee can often feel restricted by the limitations put in place

Question 15

Examples of franchises

Answer 15

• McDonalds
• Subway
• Starbucks
• Pizza Hut
• Burger King

Question 16

Advantages of a social enterprise

Answer 16

• Better customer relationships because business is transparent
• Employee satisfaction because their views are valued in the business meaning they are more motivated
• Have a USP of being ‘social’ which can attract customers to buy from businesses who help the environment

Question 17

Disadvantages of a social enterprise

Answer 17

• Lack of support and funding
• Harder to be successful
• Social aims and objectives can affect achievement

Question 18

Examples of social enterprises

Answer 18

• One Water

- The Eden Project