2.1.3

Question 1

what is unlimited liability

Answer 1

the owners of a business are liable for all the debts

Question 2

what is limited liability

Answer 2

the liability of the owners of a business is limited to the fully paid-up value of the share capital

Question 3

what is unincorporated

Answer 3

the owner is the business (they operate as sole traders)

Question 4

what is incorporated

Answer 4

A company is a legal entity.The owners of a company are shareholders

Question 5

what is a sole trader

Answer 5

a business owned by one person

Question 6

what is a partnership

Answer 6

a form of business in which 2 or more people operate for the common goal of making profit

Question 7

what is a private limited company(LTD)

Answer 7

a small to medium size business,usually run by the family or the small group of individuals who own it

Question 8

what is a public limited company (PLC)

Answer 8

a business that is managed by directors and owned by shareholders

Question 9

3 advantages of a sole trader

Answer 9

• quick and easy to set up
• simple to run
• minimal paper work

Question 10

3 disadvantages of a sole trader

Answer 10

• unlimited liability
• harder to raise finance
• the business suffers if the owner is absent

Question 11

3 advantages of partnership

Answer 11

• quite simple
• minimal paperwork
• greater potential to raise finance

Question 12

3 disadvantages of partnership

Answer 12

• unlimited liability
• complicated to sell or close
• harder to raise finance than a company

Question 13

3 advantages of a limited company

Answer 13

• limited liability
• easier to raise finance
• stable form of structure

Question 14

3 disadvantages of a limited company

Answer 14

• greater admin costs
• directors legal duty
• public disclosure of company information

Question 15

what is a cooperative

Answer 15

co operatives are owned by people who purchase shares in the business.These people are called members

Question 16

advantage of a co-operatives

Answer 16

-limited liability protection

Question 17

disadvantage of a co-operative

Answer 17

decision making can be slow as everyone has a vote

Question 18

what is franchising

Answer 18

franchisor grants a license to a franchisee to allow them to trade under the business brand

Question 19

3 advantage of franchises

Answer 19

• the business has been successful elsewhere so is less risky
• already have customers (if the franchise is well known)
• franchisors provide initial training and futher advice once the franchise is trading

Question 20

3 disadvantage of franchises

Answer 20

• no full control over the franchise
• expensive way to start a business
• some franchises run their business badly