UB - Types of organisations

Question 1

LTD advantages

Answer 1

• limited liability
• ownership not lost to outsiders
• can raise money through share issue

Question 2

LTD disadvantages

Answer 2

• profits have to be split with many shareholders
• legal setup costs - memorandum of association, articles of association
• financial statements must be shared with companies house

Question 3

PLC advantages

Answer 3

• limited liability
• large amounts of finance through public sale of shares
• easier to borrow money due to size and reputation

Question 4

PLC disadvantages

Answer 4

• threat of takeover
• difficult to pursue objectives other than profits
• dividends shared with many shareholders

Question 5

Franchise advantages (for franchiser)

Answer 5

• receives percentage of profits each year

- low-risk growth as franchisee provides capital

Question 6

Franchise disadvantages (for franchiser)

Answer 6

• reputation can be tarnished by one franchisee

- only share of profits received

Question 7

Multinational advantages

Answer 7

• wages and raw material costs lower in host countries
• avoid legislation in home country
• grants issued by governments to locate there

Question 8

Multinational disadvantages

Answer 8

• not keeping profits in host country
• exploiting workforce
• exerting political muscle

Question 9

Third sector advantages

Answer 9

• exempt from paying VAT and corporation tax
• low wage costs due to volunteers working for free
• private companies donate for PR

Question 10

Third sector disadvantages

Answer 10

• difficult to compete with marketing budgets of private sector organisations
• heavy reliance on volunteers who may leave for paid work

Question 11

Social enterprise advantages

Answer 11

• good quality employees who believe in ‘mission’ are attracted
• ethical customers attracted to them due to good cause
• ‘asset lock’ if business stops operating, sale of assets and profits used to benefit their cause
• likely to receive government grants

Question 12

Franchise advantages (for franchisee)

Answer 12

• well known and existing customer base
• training provided by franchiser
• national advertising from franchisee

Question 13

Franchise disadvantages (for franchisee)

Answer 13

• high initial start-up fees
• little autonomy over decisions as franchiser decided
• royalties must be paid