Types of Businesses

Question 1

Sole tradership

Answer 1

~ no separate ownership
~ owner funds taken as drawings
~ no perpetual succession
~ can be sold as a going concern

Question 2

Sole tradership pros

Answer 2

~ reduces administration
~ faster decision making
~ reduced publicity

Question 3

Sole tradership cons

Answer 3

~ unlimited liability for owners

~ all risks remain with owner

Question 4

Partnerships

Answer 4

~ joint and several liability
~ partners may specialise
~ succession issue

Question 5

Partnership pros

Answer 5

~ share skills of other partners

~ share of risks associated with business

Question 6

Partnerships cons

Answer 6

~ share the returns

~ difficult to exit partnership

Question 7

General partnership

Answer 7

no separate legal identity (unlimited liability)

Question 8

Companies

Answer 8

~ separate legal identity
~ dividends paid to owners
~ fixed and floating charges

Question 9

Companies pros

Answer 9

~ limited liability of members
~ perpetual succession
~ easier to raise finance

Question 10

Companies cons

Answer 10

~ separation of control and ownership
~ publicity of accounts
~ admin burden

Question 11

Joint venture

Answer 11

separate business where two or more business have a financial stake

Question 12

Joint venture pros

Answer 12

~ less capital required
~ reduces competition
~ gain access to restricted markets
~ access skills of each party

Question 13

Joint venture cons

Answer 13

~ disputes between parties
~ possible lack of financial support
~ if biz breaks down, skills could be used against former partner

Question 14

Licences

Answer 14

permission given to another company to manufacture or sell product

Question 15

Strategic alliances

Answer 15

informal or weak contractual agreement

Question 16

Agents

Answer 16

distribution channel using local knowledge and contacts