Understanding business activity

Question 1

List and Explain the difference types of business organisation

Answer 1

1.Sole trader
(i)The most common form
(ii)It is a business owned & operated by one person even if other are working for owners
(iii)The owner is called the sole proprietor

Question 2

Advantage of sole trader

Answer 2

(i)Few legal regulations
(ii)You are own boss
(iii)You have freedom to make decision

Question 3

Explain the disadvantages of sole trader

Answer 3

(i)No one to discuss
(ii)Do not have limited liability
(iii)Fully responsible for any debts

Question 4

Explain limited liability

Answer 4

The liability in a company is only limited to the amount they invested

Question 5

Explain Unlimited liability

Answer 5

The owner of a business can be help responsible for the debts of the business they own. Their liability is not only limited to the business

Question 6

Explain partnership

Answer 6

(i)A form of business in which two/more people agree to jointly own a business
(ii)It will contribute to the capital of the business will usually have to say in the running of the business and will share any profits made
(iii)Can be set up very easily

Question 7

Explain the advantages for partnership

Answer 7

(i)More capital invest in business
(ii)Additional product/services is available
(iii)The responsibility of running the business is shared

Question 8

Explain the disadvantages of partnership

Answer 8

(i)Do not have limited liability.
(ii)Do have a separate (iii)identity.
Slow-decision-making

Question 9

explain Limited partnership

Answer 9

(i)LLL(limited liability partnership)
(ii)Offers partners limited liability but shares in business cannot be brought and sold
(iii)A speaker legal unit which still exists after a partner’s death unlike ordinary partnerships that end with the death of one of partners

Question 10

Explain partnership agreement

Answer 10

It is the written and legal agreement between business partners

Question 11

Explain unincorporated business

Answer 11

One that does not have a separate legal identity

Question 12

Explain private limited companies

Answer 12

(i)Companies that have separate legal status from their owners
(ii)Exists separately from owner and will continue to exist if one of the owner dies
(iii)Can make contracts/legal agreement

Question 13

Explain the advantages of private limited companies

Answer 13

(i)Share could be sold to large number of people
(ii)No need to sell personal possession to repay debts
(iii)The owner are able to control the business as long as they don’t sell too many shares to people

Question 14

Explain disadvantages of private limited company

Answer 14

(i)Long and complicated procedure
(ii)Can’t offer share to the public
(iii)Account have to be made public

Question 15

Explain public limited companies

Answer 15

(i)Most suitable for very large business
(ii)They are not in the public sector of industry and are not owned by government but by private sector

Question 16

Explain advantages of public limited companies

Answer 16

(i)Still offers limited liability to shareholders
An incorporated business and is a separate legal unit
(ii)continuity
(iii)Opportunity to raise very large capital sum to invest in business and no limited amount of shareholders

Question 17

Disadvantage of public sector companies

Answer 17

(i)The legal complicated formalities
(ii)Regulations and control over it in order to protect interest of shareholders
(iii)Some are so large that it is difficult to manage and control

Question 18

Explain Annual general meeting

Answer 18

A legal requirement for companies
Shareholders

Question 19

Explain dividends

Answer 19

It is a payment made to shareholders from the profit of a company. They are the return to shareholders for investing in company

Question 20

Explain risk ownership and limited liability

Answer 20

Sole trader-by sole owner(one person own),no limited liability
Partnership-have several people owner,no limited liability
Shareholders own limited liability

Question 21

Explain joint venture

Answer 21

When two or more business agree to start new project together,sharing capital,risk and profits

Question 22

Advantage of joint venture

Answer 22

(i)Sharing of cost
(ii)Local knowledge

Question 23

Disagreement over important decision might occur

Answer 23

Profits have to be shared

Question 24

Explain franchise

Answer 24

A business based on the use of brand name,promotional logos method of an existing successful business. The franchisee(The owner) buy the licence to operate business from the franchisee(The original owner)

Question 25

Advantage to franchisor

Answer 25

(i)Franchisee buy license from from them to use the brand name
(ii)Expansion of business is much faster
(iii)All product sold must be obtained from them

Question 26

Disadvantage to franchisor

Answer 26

(i)Poor management-lead to bad reputation for whole business
(ii)The franchisee keep profits from outlets

Question 27

Advantage to franchisee

Answer 27

(ii)Low of chance of business failure as well-known products are sold
(ii)Franchisor pay for advertising
(iii)All supplies are obtained from a centre source

Question 28

Disadvantage to franchisee

Answer 28

Less independent than with operation a non-franchised business

Question 29

Explain public corporation

Answer 29

They were nationalised which mean that they were once owned by private individuals but were purchased by government
They are owned by the government but it does not operate business

Question 30

Advantage of public corporation

Answer 30

(i)Some industries are considered to be so important that government ownership is thought to be essential
(ii)Industries are controlled by monopolies because it would be wasteful to have competitor
(iii)If an important project is failling and is likely to be collapse,government can step into nationalise business,it will keep the business and secure job

Question 31

Disadvantage to public corporation

Answer 31

(i)No private shareholder-insist on high profit and efficiency
(ii)Profit motive are lower industries
(iii)Government subsidies

Question 32

Explain other public sector enterprises

Answer 32

(i)local government authorities/municipalities usually operate some trading activities
(ii)some of these services are changed for and expected to break even at the least