1.5.4 Forms of businesses

Question 1

What is an unincorporated business?

Answer 1

Bus and owner dont have seperate legal entity

-owner has unlimited liability

-cannot sell shares

Question 2

What is a legal entity?

Answer 2

any company or organization that has legal rights and responsibilities, including tax

Question 3

What is a sole trader?

Answer 3

Where an individual is owning a business on their own
-They can employ people but dont share the ownership

Question 4

What’s sort of liability do sole traders have?

Answer 4

Unlimited liability
Meaning they own all the assets and are personally responsible for all debts

Question 5

Give 2 strengths of operating as a sole trader

Answer 5

-Simple to run as the owner has complete control over decisions

-Full control - make all decisions with no approval needed

Question 6

Give 2 limitations of operating as a sole trader

Answer 6

Unlimited liability

The business is the owner, if the owners ill or loses interest the business will suffer

Question 7

What is a partnership?

Answer 7

The business is started and owned by more than 1 person

Question 8

What does the legal partnership agreement set out?

Answer 8

How partnership runs:
-how profits shared
-how decisions made

Question 9

What sort of liability do partnerships have?

Answer 9

Unlimited liability, meaning the partners own all the assets and are personally responsible for debts

Question 10

Give 2 strengths to operating as a partnership

Answer 10

-expertise and shared workload leads to increased efficiency

-greater potential to raise finance as both partners can provide

Question 11

Give 2 limitations to operating as a partnership

Answer 11

-Unlimited liability Meaning

-potential for conflict, delaying vital decisions

Question 12

How is limited liability important?

Answer 12

It protects shareholders in a company as they can only lose their investment

Question 13

Whats an incorporated business

Answer 13

business ans owner have seperate legal entity (limited company)

-can sell sharers

-limited liability

Question 14

What is a limited company?

Answer 14

A company that has seperate legal entity to its founder.

-its owned by shareholders (who dont own assets and have limited liability) and run by directors

Question 15

Give 2 strengths of being a limited company

Answer 15

limited liability

Shares in a limited company can be easily transferred, allowing for flexibility in ownership and potential for future business growth

Question 16

Give a limitation of being a limited company

Answer 16

Less Control: Shareholders may have a say in business decisions, which can dilute the control of the original owner

Question 17

What is a private limited company?

Answer 17

A limited company where the shares of the company aren’t traded publicly on a stock exchange

Question 18

Give a strength and a limitation to operating as a private limited company

Answer 18

S- limited liability

L- Harder to raise capital as shares can’t be sold to the public

Question 19

What is a public limited company?

Answer 19

A limited company where shares may be traded on the public stock market, more shareholders

Question 20

Give a strength and a limitations to operating as a public limited company

Answer 20

S- limited liability

L- loss of control if shareholders purchase more than 50%

Question 21

What are public sector organisations?

Answer 21

government owned entitles focused on providing essential services to the public

-funded by gov through tax

Question 22

What is a social enterprise?

Answer 22

business with aim of making profit and achieving social/environmental goals

Question 23

What’s a not for profit organisation?

Answer 23

an organisation that does not aim to make profit for owners or shareholders.
Instead, any money it earns is reinvested back into its services or used to achieve its social purpose

Cancer research .

Question 24

What is franchising?

Answer 24

Business arrangement where franchisor grants a franchisee rights to use their brand

Question 25

Strengths of franchising

Answer 25

S- established brand recognition attract cust (inc sales) -franchisors provide training for franchisee (lowers cost)

Question 26

limitations of franchising

Answer 26

cost (initial fee and ongoing royalties (% of sales)- reduces profit, inc cost -not much control over how franchised bus is run- follow franchise rules