Types Of Businesses

Question 1

Describe the public sector

Answer 1

Business is run by government,
provides most public goods, usually not profit pretended,
employees are greater portion of the labour force and raises funds through taxation, borrowing, issuing government securities and more.

Question 2

Describe the private sector

Answer 2

Driven by the profit motive which may be reflected by the prices, raises funds by borrowing or issuing shares and loans and businesses owned and operated by private individuals

Question 3

What is a sole trader?

Answer 3

A personal who owns his or her business

Question 4

What are characteristics of a sole trader business?

Answer 4

Easy to set up, financed by owners, bears all risks and keeps all profits, provides a personal service and has no one to account to

Question 5

What are advantages of a sole trader business?

Answer 5

Easily and quickly formed and dissolved, close relationship with customers, decisions can be made quicker, takes all profits and pays lower personal tax not company tax

Question 6

What are disadvantages of a sole trader business?

Answer 6

Limited capital and it is not easy to get loans, long working hours, business usually dissolves if owner dies and lack of specialized staff

Question 7

How are sole trader business formed?

Answer 7

No legal formalities needed except sometimes a special license. Usually required to register their trade name

Question 8

How is a sole trader business managed?

Answer 8

Usually the sole trader and in some cases a few employees

Question 9

What is a partnership?

Answer 9

An association between 2-20 people operating a business.

Question 10

What are the two types of partnerships?

Answer 10

Ordinary partnerships where everything is shared equally and limited partnerships.

Question 11

What are disadvantages of a partnership?

Answer 11

Unlimited liability, personalities of partners might cause difficulties in decision making, some difficulty in raising capital, with no agreement all profits must be shared equally.

Question 12

How is a partnership formed?

Answer 12

A partnership deed is usually written up to form the arrangement

Question 13

How is a partnership managed

Answer 13

By the ordinary partners

Question 14

What are the advantages of a partnership?

Answer 14

Easy to set up, business doesn’t end if one partner dies, shared workload, pays Lower personal tax not company tax, more capital obtained than sole trader.

Question 15

What is a Co-operative?

Answer 15

Businesses that are formed, owned and operated by its members.

Question 16

What are the characteristics of a cooperative?

Answer 16

All members have a vote,
limited interest on money invested,
the members are the clients,
members usually have a common bond
and profits distributed among members.

Question 17

What are types of cooperatives?

Answer 17

Financial co-ops, consumer co-ops and agricultural co-ops.

Question 18

What are advantages of cooperatives?

Answer 18

There is a market for members, employment is provided, owned and operated by its members, all profits shared among members and shared decision making.

Question 19

What are the disadvantages of cooperatives?

Answer 19

Poor inexperienced and unqualified management, conflict among members can lead to slow decision making and unable to attract skilled professionals

Question 20

How are cooperatives formed?

Answer 20

Each member purchases shares to form the capital base of the cooperative

Question 21

How are cooperatives managed?

Answer 21

By the membership through a management board elected by members

Question 22

What is a company?

Answer 22

A legal business entity which has been incorporated and is separate from its owner(s)

Question 23

What are two types of companies?

Answer 23

Private limited companies and Public Limited companies. Ltd and PLC

Question 24

What is a private limited company?

Answer 24

A company where 2-50 shareholders form a company

Question 25

What are characteristics of a private limited company?

Answer 25

Limited liability, a separate legal entity, governed by memorandum or articles of association, proper accounts must be kept for tax purposes, 2-50 shareholders and they tend to be owned by families and close friends

Question 26

What are advantages of a private limited company

Answer 26

The company is separate from owners, shareholders have limited liability up to the amount they invested, easy access to loans, privacy and larger capital base than sole traders or partnerships.

Question 27

What are the disadvantages of a private limited company?

Answer 27

Shares aren’t traded publicly
and therefore capital base will be limited, skills may be limited,
shares are not transferable without the directors consent

Question 28

How are private limited company’s formed

Answer 28

Certain legal requirements are needed such as a memorandum or articles of association or a statement of authorized registered or nominal capital

Question 29

How are private limited companies managed

Answer 29

The owners manage the business or hire specialized personnel

Question 30

What are public limited companies?

Answer 30

An incorporated company which offer shares to the public

Question 31

What are characteristics of public limited companies?

Answer 31

Limited liability,
separate entity,
governed by a memorandum and articles of association and prospectus,
directors elected at AGM,
proper accounts must be kept for tax purposes
and shares are sold to members of the public.

Question 32

What are advantages of a public limited company?

Answer 32

Separate from owners, shareholders have limited liability up to the amount invested, easy to access loans, risk is spread amount shareholders, easy transfer of shares and specialists are hired to run the firm

Question 33

What are disadvantages of a public limited company?

Answer 33

Objectives of managers may differ from owners/shareholders, workers are not part of decision making and accounts must be submitted for inspection

Question 34

How is a public limited company formed?

Answer 34

Certain legal requirements are needed such as memorandum or articles of association,

statement of authorized registered or nominal capital and prospectus.

Question 35

How is a public limited company managed?

Answer 35

By a board of directors

Question 36

What is a franchise?

Answer 36

A right which is bought by a franchisees from the franchiser to sell goods using the franchisers name.