Unit 3 Forms of business ownership

Question 1

Advantages to of operating as a ltd

Answer 1

Easier to raise capital than a sole trader or partnership
Shareholders have limited liability
No hostile takeover

Question 2

Disadvantages to of operating as a ltd

Answer 2

Accounts have to be filed - cannot keep information from competitors
Limited in the capital it can raise - not a plc
Shared profits

Question 3

Advantages to of operating as a plc

Answer 3

Raise more capital if required
Make it easier for the company to borrow money from banks
Improve the corporate image of the company in the eyes of consumers

Question 4

Disadvantages to of operating as a plc

Answer 4

Significant costs involved in going public time-consuming and expensive
The business may become a target to be taken over
Company would now have to concentrate more on keeping shareholders happy on a short-term basis

Question 5

Advantages of franchising to a franchisee

Answer 5

Guaranteed high sales
Global brand advertising
Might access funds or training support from the franchisor

Question 6

Disadvantages of franchising to a franchisee

Answer 6

Paying a start-up fee and Royalties
Brands negative image affects you
Franchisor will have significant input

Question 7

Ltd definition

Answer 7

Owned by shareholders, managed by directors. It has limited liability

Question 8

PLC definition

Answer 8

Owned by shareholders, managed by directors. It floats on the stock market and has limited liability