Unit 1 - 1.3 (Forms of legal business ownership)

Question 1

Sole Trader

Answer 1

Owned by one person. Owner might employ a few others to work alongside them.

Question 2

Partnership

Answer 2

Two or more owners. Deed of Partnership (non-compulsory) stating how profits will be shared.

Question 3

Private limited company

Answer 3

Shares in the business are sold to raise finance. Shareholders are those who buy shares and are the legal owners.

Question 4

Public limited company

Answer 4

Shares can be bought and sold through the stock market. Business must have a share capital of over £50,000. Typically has a lot of shareholders.

Question 5

State/ government owned

Answer 5

Funded by the government, government controlled. (e.g - BBC …)

Question 6

Charity/ not-for-profit

Answer 6

Have charitable aims and invest any money they make in the cause they support.

Question 7

Sole Trader (Advantages)

Answer 7

• Solely responsible for decision making
• Can choose they own working hours and holidays
• Do not have to share profits with other owners

Question 8

Partnership (Advantages)

Answer 8

• There are others to discuss decisions with
• Partners may have different areas of expertise that can benefit the business
• Few legal requirement when starting up the business

Question 9

Private limited company (Advantages)

Answer 9

• Shareholders have limited liability
• Shares can be sold to raise finance
• Owners can keep control as long as they limit the number of shares sold

Question 10

Public limited company (Advantages)

Answer 10

• Shareholders have limited liability
• Shares can be bought, sold and transferred easily
• Shares can be sold on the stock market to raise capital if necessary

Question 11

State/ government owned (Advantages)

Answer 11

• Receive government support
• Government ensures that vital business survive.

Question 12

Charity/ not-for-profit (Advantages)

Answer 12

• Get to choose their own working hours and holidays
• Few legal requirements needed to start the business.

Question 13

Sole Trader (Disadvantages)

Answer 13

• Personally liable for any debts the business may make (unlimited liability)
• Do not have co-owners to discuss ideas with
• Often work long hours and take few holidays due to the responsibilities they have

Question 14

Partnership (Disadvantages)

Answer 14

• If one partner dies then the partnership automatically ends as there isn’t separate legal entity
• Partners have unlimited liability (personally liable for any debts the business can’t pay)
• All profits are shared

Question 15

Private limited company (Disadvantages)

Answer 15

• Becoming an Ltd is an expensive and long process
• Shares cannot be sold to the general public
• Shares cannot be transferred without the permission from other shareholders.

Question 16

Public limited company (Disadvantages)

Answer 16

• Becoming a plc is an expensive and long process
• Original owners are unlikely to have full control over the decision making
• There is greater risk of takeover

Question 17

State/ government owned (Disadvantages)

Answer 17

• Businesses can be used for political gain

Question 18

Charity/ not-for-profit (Disadvantages)

Answer 18

• Often depend on volunteers making it difficult to maintain support
• Can be expensive and often regulated by Companies house and the charity commission

Question 19

Community interest companies

Answer 19

Aim to benefit the community or trade with a social purpose in mind. Shareholders may have a small share in the profits.

Question 20

Community interest companies (Advantages)

Answer 20

• Company has its own legal identity
• Reputation of the business may be enhanced

Question 21

Community interest companies (Disadvantages)

Answer 21

• Tax must be paid on profits

Question 22

Incorporated

Answer 22

Separate identity between the business and the owner (e.g - plc, Ltd) (Unlimited liability)

Question 23

Unincorporated

Answer 23

No separate identity between the business and the owner. (e.g - sole trader, partnership) (Limited liability)