UB - Types of Organisations

Question 1

Describe the features of a sole trader organisation

Sector, Owned by, Controlled by, Financed by

Answer 1

Sector?: Private
* Owned by: Private individual
* Controlled by: Private individual
* Financed by: Owners personal assets, bank loans, money from relatives

UNLIMITED LIABILITY FOR OWNERS

Question 2

Describe the features of a partnership organisation

Sector, Owned by, Controlled by, Financed by

Answer 2

Sector?: Private
- Owned by: 2-20 partners
- Controlled by: Partners
- Financed by: Inviting more partners that invest savings

UNLIMITED LIABLITY FOR OWNERS

Question 3

Describe the features of an Private Limited (LTD) organisation

Sector, Owned by, Controlled by, Financed by

Answer 3

Sector?: Private
- Owned by: Private (invited) shareholder
- Controlled by: Board of Directors
- Financed by: Selling shares to relatives

LIMITED LIABILITY FOR SHAREHOLDERS

Question 3

• What is a social enterprise?
• Describe the features of a social enterprise

Answer 3

Business that has social objectives, but reinvests their profits to their chosen cause
- Sector?: Third
* Owned by: Social entrepreneur
* Controlled by: the entrepreneur
* Financed by: retained profits, donations, fundraising

UNLIMITED LIABILITY FOR OWNER

Question 4

• What is a charity?
• Describe the features of a charity

Answer 4

Organisation set up to support a specific cause by raising funds
Sector?: Third
* Owned by: Trustees
* Controlled by: Board of elected trustees
* Financed by: Donations, government grants, fundraising

LIMITED LIABILITY FOR TRUSTEES

Question 5

Define the following terms:
* limited liability
* unlimited liability
* community groups

Answer 5

• Shareholders are only responsible for the money they invested
• Business owner(s) are responsible for all debts
• Non-profit that exists to provide a service.

Question 5

Discuss 3 advantages and disadvantages of operating as a sole trader

Answer 5

ADVANTAGES
* All profits go to owner only
* Little legal paperwork required to start → easy to set up
* Decisions are only made by one person → no arguments

DISADVANTAGES
* Huge workload → long working hours
* Unlimited liability → business owner is responsible for all debts
* Limited finance is raised

Question 6

Discuss 3 advantages and disadvantages of operating as a partnership

Answer 6

ADVANTAGES
* More partners = different skills
* Shared workload
* More finance can be raised

DISADVANTAGES
* Profit is shared
* More partners = arguments
* Unlimited liability

Question 7

Discuss 3 advantages and disadvantages of operating as an LTD

Answer 7

ADVANTAGES
* Limited liability - shareholders are only responsible for what they have invested
* Owners can retain control
* Shares can be sold → easy to raise money

DISADVANTAGES
* Shares cannot be sold publicly
* Legal requirement to publish annual financial statement
* High set up costs