Vision, Aims and legal structures

Question 1

define entrepreneur

Answer 1

Someone who owns a business.

Question 2

describe some essential skills of entrepreneurs

Answer 2

confidence. organisation. punctuality. responsible. determination.
risk takers!

Question 3

give 3 reasons to the start a business and describe them

Answer 3

• personal - more control, own boss and change jobs.
• financial - better living standards.
• Social - beneficial ideas to society.

Question 4

define a mission

Answer 4

a statement that sets out the organisation’s overall purpose and why it exists.

Question 5

define an aim

Answer 5

the organisation’s goal

Question 6

what is the purpose of a vision statement?
Give 5 reasons.

Answer 6

1. to communicate the core values of the biz
2. to attract a range of stakeholder groups (employers and investors)
3. making the biz stand out from competitors.
4. create unity amongst employees to achieve the aim.
5. asses progress and implement change if necessary.

Question 7

what are the different legal structures of businesses? List the 6.

Answer 7

1. Sole trader
2. Partnership or limited liability partnership (LLP)
3. Private limited company (Ltd)
4. Public Limited company (PLC)
5. Community Interest groups
6. Co-operatives.

Question 8

describe the legal structure of a Sole trader Include -
1. Liability - describe it.

Answer 8

1. unlimited liability - the owner is responsible for all the debt of the biz.
   and has to pay for loses with personal funds.

Question 9

describe the financial implications of sole trading.
1. what is limited but what is also available?

2. does the owner need to pay income tax on the profits?

Answer 9

1. limited finances, and unlikely to be offered credit from suppliers.

available sources - personal savings, loans from family and friends and small bank loans.

2. yes they pay income tax on profits.

Question 10

what are the advantages of sole trading? list 5

Answer 10

1. cheap and easy setup.
2. owner gets all profits.
3. can make own decisions.
4. can keep financial records private.
5. High motivation cos biz success = owners success.

Question 11

what are the disadvantages of sole trading? list 4

Answer 11

1. unlimited liability
2. limited capital for investments.
3. little specialist skills are available, cos only the owner’s skills will be used, or they can hire specialists.
4. difficulty finding cover when ill - however employers can fill in

Question 12

what is an LLP (Partnership or limited liability partnership). and how many people are involved.

Answer 12

a partnership between 2 and 20 people.

Question 13

what are the financial implications of an LLP?
1. what is available
2. who pay income tax on the profits?

Answer 13

1. Finance is available from all the partners in the form of their personal savings.
   - loans can be taken from fam and friends.
   - loans from the bank.
   - the risks and profits are spread amongst all partners.
2. all partners pay income tax on the profits.

Question 14

list the advantages of the legal structure - LLP
- list 5

Answer 14

1. risks, costs and responsibilities are shared.
2. more specialist skills amongst the team.
3. simple and flexible
4. financial records remain private.
5. more capital raised than as a sole trader.

Question 15

List the disadvantages of and LLP.
give me 4

Answer 15

1. unlimited liability - amongst partnerships only.
2. arguments can arise with decision-making.
3. if a partner dies, resigns or goes bankrupt then the partnership is dissolved.
4. trust is significant and an agreement must be drawn up.

Question 16

describe a Private Limited Company - Ltd

Answer 16

have Ltd after the name owned by shareholders who are usually family and friends.

Question 17

1. describe the financial implications of a Ltd. list 4

2 what is corporation tax and compare it to income tax.

Answer 17

• the Ltd sells shares to family and friends
• more likely to gain bigger bank loans.
• ## more likely to get credit from suppliers despite limited liability, cos they are more established.
  2. corporation tax is paid on top of profits. it is lower compared to income tax.

Question 18

which legal structures pay income tax.

Answer 18

sole traders and partnerships (LLP)

Question 19

list the advantages of an Ltd - private limited company

ravs list the main reasons for each advantage or disadvantage.

Answer 19

1. limited liability.
2. more flexibilty than a PLC, cos it’s easier to communicate with shareholders.
3. more skills brought into the biz
4. financial records remain relatively private.
5. more capital can be raised through the sales of shares compared to sole traders and partnerships.

Question 20

list the disadvantages of and Ltd.
list 3
- set up
- shareholders and voting right?
- shares

Answer 20

1. more complex to set up cos of increased legal requirements.
2. loss of control cos shareholders have voting rights.
3. unable to sell shares to the public - cos its a Private limited company.

Question 21

describe a public limited company - PLC
describe how the shares are sold.

Answer 21

shares are sold on the stock exchange. option is only available to large biz’s.

Question 22

list the financial implications of being part of a PLC
- Describe the Ltd.

Answer 22

similar to a Ltd, but have more access to finance cos they can sell shares to a wider audience through the stock exchange.

Question 23

list the advantages of a PLC
- include that of the Ltd.

Answer 23

again similar to and Ltd but also have the benefit of the status of PLC.

Question 24

list the disadvantages of a PLC - list 4 -

1. financial performance view?
2. set up?
3. control?
4. risk of takeover and control?

Answer 24

1. lack of privacy cos financial performance is available for all to view.
2. more complex to set up, cos increased legal requirements and ongoing admin costs.
3. some loss of control as shareholders have voting rights.
4. risk of hostile takeover cos shares can be brought and they have no control - needs 51% for takeover.

Question 25

describe what a community interest group is?

Answer 25

a cross between an Ltd and a charity.

Question 26

list the financial implications of a community interest group
- limitations and benefits.

Answer 26

1. limited opportunity to raise finance cos there are no profits. however, they can issue shares in the same way a Ltd can.
2. they can receive grants from the gov.

Question 27

list the advantages of a community interest group. list 3
1. type or organisation
2. limited liability
3. rules and regs.

Answer 27

1. it’s a Not For Profit organisation. any profit or asset it has must be reinvested in the community for a social benefit.
2. has limted liability
3. less rules and regulations than being a charity.

Question 28

list the disadvantages of community interest groups.

Answer 28

cos they aren’t for profit, raising finance is difficult cos investors don’t get a return (dividend)

Question 29

Describe cooperatives

Answer 29

biz’s run by employees/members = who are the shareholders.

Question 30

list the financial implications of a co-op

Answer 30

1. they can raise finance in the same way as an Ltd.
2. they can issue shares to their employees or the wider community.
3. they can raise finances through the banks.

Question 31

list the advatages of a co-op.

Answer 31

1. they are profit-making.
2. gives employees more involvement in the biz.
3. shareholders only have one vote per person, regardless of how any shares they have. no one person/group can dominate.

Question 32

list the disadvantages of co-ops. only one - re. shares.

Answer 32

1. limited ability to raise finance cos they can’t sell shares.

Question 33

what factors should be considered when chossing a legal structure?
list 4

Answer 33

1) type of a biz
2) risk (liability)
3) profit shared
4) control

Question 34

what are the benefits to society of public sector companies, and give examples.

Answer 34

they provide services which possibly improve the quality of life.
- eg - education, welfare, police, NHS.

Question 35

Give examples of the most common legal structures for starting a business.

Answer 35

sole traders, partnerships, private limited companies.