Understanding Different Business Forms

Question 1

Advantages of a sole trader

Answer 1

Easy to start up- don’t need to register
Freedom to make own decisions
Profits don’t have to be shared

Question 2

Challenges of sole traders

Answer 2

Pressure of responsibility if something goes wrong
Hours can be demanding -early years
Can’t take much time off for holidays
Difficulties raising finance -own money used
Unlimited liability

Question 3

Companies

Answer 3

Complete memorandum of association and articles of association.
Register at companies house( incorporation)
Owned by shareholders
Limited liability

Question 4

Private limited companies “Ltd”

Answer 4

Usually smaller than Plc
Cheap to set up
Limited liability can agree to pay if fails
Can limit who shares are sold to

Question 5

Why might they stay as a private limited company?

Answer 5

To retain control over the company
Taking decisions in the company’s long term interest
Enjoying the profits generated by the company

Question 6

Sole traders

Answer 6

1 person own a business
Small
May hire others
Must be confident , high level of skill and a range of skills
Must be self disciplined, motivated

Question 7

Public limited companies “plc”eg M&S

Owned by 2-50 shareholders

Answer 7

Measured thorough market capitalisation (value of issued shares)
Restrictions can’t be placed on who buys shares -can lead to a takeover
Share Accounts are published

Question 8

Benefits of being a public company

Answer 8

Access to capital by selling shares
Publicity
The ability to take over other companies

Question 9

Reasons for changing business forms

Answer 9

Growth
Needing access to more capital
Wanting to attain a higher profile

Question 10

Not for profit businesses eg local sports clubs, charities

Answer 10

May have a strong belief in a particular issue or there to provide a hobby
Jamie’s 15-offer chance to unemployed youngsters to aquire skill

Question 11

How many people can be involved in a partnership

Answer 11

2-20 partner

Question 12

Advantages of a partnership

Answer 12

Easy to set up
Shared responsibility
Greater access to capital

Question 13

Disadvantages of a partnership

Answer 13

all partners liable for debts of others
Unlimited liability
Potential for conflict

Question 14

Social enterprises eg teach first

Answer 14

Have social objectives

Surpluses reinvested Into business / community

Question 15

Who has limited liability?

Answer 15

LTD’S and PLC’S