Business Organisations true or false

Questions and Answers

Franchising allows the franchisee to control the overall operation of the franchisor's business.

False

Members of cooperatives do not have limited liability.

False

Franchisees must always pay an upfront fee to the franchisor.

True

Cooperatives typically operate with a profit-driven motive.

False Signup and view all the answers

McDonald's outlets in Ireland are all owned by the same corporate entity, rather than franchised.

False Signup and view all the answers

Cooperative members can influence business decisions during the Annual General Meeting.

True Signup and view all the answers

If a franchisee maintains poor standards, it can negatively impact the entire franchise brand.

True Signup and view all the answers

The limit on finance raised from each member is an advantage of cooperatives.

False Signup and view all the answers

Corporation tax on cooperative profits is set at 15%.

False Signup and view all the answers

A common bond among members is a significant characteristic of cooperatives, like in credit unions.

True Signup and view all the answers

Study Notes

Sole Trader

Owned and managed by one individual; simple structure.
Registration requires Form TR1 sent to local Revenue Office; business may operate under owner’s name or a registered name.
Holds unlimited liability, risking personal assets in case of business failure.
Financing limited to personal savings for equity and potential loans based on business plans.
Financial results are private and not disclosed, offering confidentiality to the owner.
Sole authority in business decisions and operations; not a separate legal entity.
20% to 40% personal income tax on profits; all earnings retained by the owner.
Advantages include ease of setup, complete control, and privacy but face risks like unlimited liability and higher tax rates.

Partnership

Composed of 2 to 20 individuals; common in professional practices like law and accounting.
Requires signing Form LP1 and a deed of partnership detailing rights and profit sharing.
Partners share unlimited liability, exposing personal assets to business debts.
Decisions and controls are jointly managed among partners.
Like sole traders, partnerships are not separate legal entities and share profits collectively.
No continuity of existence; the partnership ceases without partner intervention.
Financial results are kept confidential, and equity is limited to partners’ savings.

Private Limited Company (CLS or DAC)

Specializes in limiting liability; shareholding between 1 and 149 individuals.
Formation involves adherence to legal regulations and filing necessary documentation.
Substantial ability to raise capital by selling shares while minimizing personal risk; shareholders liable only for their investments.
Operates independently of its owners, ensuring continuity despite shareholder changes.
Subject to corporation tax of 12.5% on profits.
Costs and regulations for setup are higher compared to sole traders and partnerships.
Control based on share ownership with the potential for maintaining majority ownership.

Cooperative

Members run the business democratically, with each member having one vote.
Legal entity stands apart from its members, ensuring continuity beyond individual involvement.
Profits distributed based on member turnover or savings contribution; less profit-driven.
Members enjoy limited liability, protecting personal assets.
Access to finance may be easier due to high credit ratings; common interests among members foster solidarity.
Frequently face limitations on the amount of capital raised from each member.

Franchise

Involves a franchisor allowing a franchisee to operate under its brand in exchange for fees or profit percentages.
Enables business expansion without additional capital risks for the franchisor, passing risks to the franchisee.
Franchisees benefit from established business models and brand recognition.
Maintenance of standards is critical due to collective brand image risk; examples include McDonald's franchise operations.
Tax liabilities include a 12.5% corporation tax on profits.

Description

This quiz covers various types of business organisations, including Sole Traders, Partnerships, and Limited Companies. Each organisation type is briefly described, focusing on its formation and characteristics. Test your understanding of these essential business structures.