Types Of Businesses

Question 1

Private sector

Answer 1

Businesses owned and run by private individuals, usually for profit often referred to as private enterprise

Question 2

Public-sector

Answer 2

Businesses and organisations owned and run by local or central government, whose objective is to provide a service rather than make a profit e.g. BBC
NHS

Question 3

Legal structure can have an affect on

Answer 3

Ownership and control of the business
Responsibility for any debt
Sources of finance available
Objectives pursued

Question 4

Limited liability

Answer 4

Type of investment in which an investor can not lose more than the amount invested
Only lose what you put in

Question 5

UnLimited liability

Answer 5

Type of investment where and investor can lose and unlimited amount of money e.g. personal possessions

Question 6

What is a sole trader

Answer 6

This is the simplest form of a business organisation and involves the sole trader owning the business and making all the decisions e.g. hairdressers, plumbing

Question 7

Sole trader conditions

Answer 7

Can’t have more than one person working there
Owner has overall control
Owner and business are inseparable (unincorporated)

Question 8

Advantages of a sole trader

Answer 8

Few legal requirements but may need license
Quick and easy
Keep all profit after taxes
Cannot sell shares so company cannot be taken over
Financial state is private

Question 9

Sole trader disadvantages

Answer 9

Unlimited liability
Must perform all business functions on their own
Capital for expansion can be hard to raise
Can be easily overworked
Its sole trader dies so does the business

Question 10

Partnership

Answer 10

2 to 20 people that run a business together e.g. solicitors, accountants and dentists

Question 11

Partnership conditions

Answer 11

Unincorporated as partnership is not an entity on its own the partners are the business
Deed of partnership should be drawn up this is a legal document which shows each partners investment, income, responsibilities etc

Question 12

Partnership advantages

Answer 12

Easy to establish
More capital there for expansion is easier
Workload is shared and employees have different skills
Losses can be shared
Financial state is kept private

Question 13

Partnership disadvantages

Answer 13

Unlimited liability so therefore liable for any debts
Decision-making is slower and more chance of disagreements
Legal number of partners is limited therefore hard to expand
Losses and profits can be shared
No continuity

Question 14

What is a sleeping partner

Answer 14

A partner who invest money but has no say in how it is used

Limited liability

Question 15

Limited companies

Answer 15

Incorporation: business exists in its own right
People who own the company are not necessarily the same as those who run it
Shares: raise funds via the issue of shares
Limited liability – if the company goes into liquidation, the shareholders don’t have to, cover the debt

Question 16

Private limited company

Answer 16

Usually family run businesses, where shares can be brought by family and friends

Question 17

Private limited company advantages

Answer 17

Access to funds through the issue of shares
Stable form of business structure
Limited liability is the benefit for the shareholders, who may see the risk as more acceptable than if the business were on Incorporated
Incorporations mean the businesses will still exist if the shareholders resign or die

Question 18

Private limited company disadvantages

Answer 18

Banks may see the business as a risk
More complicated setup process than unincorporated business structures
Limited liability might be a benefit for shareholders but lenders may see it as a risk

Question 19

Public limited company

Answer 19

Larger than private companies, where shares can be traded on the stock market

Question 20

Public limited companies advantages

Answer 20

Scale of funds that can be raised from flotation allowing anybody to buy shares
Future funds can be raised because banks and lenders see the business as stable

Question 21

Public limited company disadvantages

Answer 21

Process of floatation is expensive
Can’t control who owns shares in a plc as they are traded publicly
Financial information must be provided
A plc is owned by shareholders and run by managers making decisions hard to make

Question 22

Limited liability partnership’s

Answer 22

Combine some features of partnership with some of those of limited companies, where it has separate legal entity, so owners have limited liability

Question 23

Limited liability partnership conditions

Answer 23

The owners of a LLP are called members rather than partners
A creation of a LLP means it’s possible to have the advantages of a partnership combined with limited liability
However annual accounts can be seen by anyone

Question 24

Franchises

Answer 24

Where a business with a well-known brand name let a person or a group set up their own business using the brand

Question 25

Franchises extra information

Answer 25

Exchange for an initial fee
Continue to pay royalties
Unlimited liability to franchisee if they are in business as a sole trader or partnership
Limited liability if they set up as a company

Question 26

Franchise examples

Answer 26

McDonald’s, Burger King and the body shop

Question 27

Franchises advantages to the franchiser

Answer 27

Does not have to spend large amounts of money to expand
The products are operated under franchises direct control. This can lead to high prices for supplies
Applicants have to be carefully selected for their sustainability

Question 28

Franchises advantages for the franchisee

Answer 28

The franchisee is using a tried and tested brand name, so there is a greater chance of success
Specialist advice and training are available from the franchisor
Don’t have to do market research so you can spend more time selling products and making a profit
Easier to obtain finance from the bank because the company is trusted

Question 29

Disadvantages to the franchisee in a franchise

Answer 29

Franchise is not automatically renewed
The business cannot be sold with out franchise a commission
Suppliers have to be brought from franchisor which may be more expensive than the open market
Some profit has to be given to franchisor
Have less control on what they are selling

Question 30

E businesses

Answer 30

Most well established businesses now use the Internet as well as the usual outlets e.g. Tesco dominoes Debenhams Amazon and ASOS

Question 31

E business advantages

Answer 31

The technology reduces the necessity to open from a large, expensive building
There is plenty of potential for cost savings in the way the operation is run; many E – businesses can be run from a persons home
The business is convenient as it is open all day every day

Question 32

E – businesses disadvantages

Answer 32

The technology must actually work
The payment system must be secure
The website must be carefully designed to be user friendly
Time must be devoted to updating the website
Awareness must be generated to the public so they know the website exists
Business must insure distributors get product to customers in time
Not everyone has Internet access