Business Structures Overview
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Questions and Answers

Which of the following is an advantage of being a sole trader?

  • Long working hours with few holidays
  • Owner keeps all the profits (correct)
  • Harder to get loans from banks
  • Unlimited liability

    • What is a disadvantage of a partnership?

  • Workload can be shared
  • Partners can specialize in different areas
  • Arguments may occur (correct)
  • More money can be invested

    • Only one partner can manage a partnership.

    False

    What is one advantage of a franchise?

    <p>Reduced marketing costs</p> Signup and view all the answers

    What does a franchisor gain from a franchise agreement?

    <p>Steady cash flow from royalty payments</p> Signup and view all the answers

    What is the minimum number of shareholders in a public limited company (PLC)?

    <p>Two</p> Signup and view all the answers

    What is the aim of businesses in the private sector?

    <p>Maximize profits</p> Signup and view all the answers

    A company whose shares are privately owned is called a ______.

    <p>Private Limited Company (Ltd)</p> Signup and view all the answers

    What is a characteristic of multinational corporations (MNCs)?

    <p>Branches or subsidiaries in more than one country</p> Signup and view all the answers

    Which of the following is NOT a type of organization in the third sector?

    <p>Public corporation</p> Signup and view all the answers

    Study Notes

    Sole Trader

    • Easy to set up with low costs
    • Owner makes all decisions and keeps all profits
    • Difficult to secure loans
    • Unlimited liability for debts
    • Long working hours & limited time off
    • Sole responsibility for all aspects of business
    • Challenges if owner becomes ill

    Partnership

    • Managed by 2-20 people
    • Workload shared
    • Partners can specialize in different areas
    • More capital invested
    • Unlimited liability for debts
    • Potential for disagreements
    • Profits shared amongst partners
    • Business disruption if a partner leaves

    Why bring in more partners?

    • Gaining expertise
    • Generating new ideas
    • Increasing capital investment

    Franchise

    • Agreement to use an established brand name and products/services
    • Offers a way to run a business, not a business itself

    Franchisee

    • Reduced marketing costs due to established brand

    • Lower risk compared to starting independent business

    • Potential for training and support from franchiser

    • Products, pricing, and store layout often dictated by franchiser

    • Royalty payment (often a percentage of revenue) required

    • High initial costs are common

    Franchisor

    • Fast expansion method without significant investment
    • Steady cash flow from royalty payments
    • Shared risk between franchiser and franchisee
    • Negative impact on reputation if franchisee performs poorly
    • Risk of franchisee failing to return funds

    Case study: Subway

    • Investment of £100,000-£150,000 for a Subway franchise
    • Franchisee granted right to operate in a specific location and use the brand
    • Fees provide access to national advertising, brand awareness, and support

    General Business Disadvantages

    • Substantial setup costs
    • Lack of control over who buys shares
    • Requirement to publish annual accounts
    • Need to comply with company regulations

    General Business Advantages

    • Easy access to loans due to larger size
    • Limited liability

    Types of Organisations

    • Three main sectors: private, public, and third

    Types of Businesses

    • Private Sector:

      • Sole trader
      • Partnership
      • Private Limited company
      • Public Limited company
      • Multinational company
      • Franchise

    • Public Sector:

      • Public sector organization
      • Local council (government)
      • Public corporation

    • Third Sector:

      • Charity
      • Voluntary organisation
      • Social enterprise
      • Co-operatives

    Private Sector Aims

    • Maximize profits
    • Transform innovative ideas into successful businesses
    • Expand the business for continued growth

    Private Sector Examples

    • Private Limited companies (Ltd)
    • Public Limited companies (PLC)
    • Franchises

    Limited Companies

    Private Limited Company (Ltd)

    • Shares are privately owned, not available to public
    • Minimum of one shareholder

    Public Limited Company (PLC)

    • Shares are available for purchase by the public on the stock market
    • Minimum of two shareholders
    • Owned by shareholders
    • Controlled by a board of directors
    • Must produce a memorandum and articles of association

    Private Limited Company (Ltd) Advantages

    • Ownership control remains with insiders
    • Easier to raise finance from shareholders and lenders
    • Boards of directors bring experience to aid decision-making

    Private Limited Company (Ltd) Disadvantages

    • Profits shared amongst more people
    • Shares cannot be sold to the general public
    • Must comply with company regulations

    Private Limited Company (PLC) Advantages

    • Ability to raise significant capital by selling shares
    • Limited liability for shareholders

    Different Sectors of the Economy

    Multinational Corporations (MNCs)

    • Operate branches or subsidiaries in multiple countries
    • Establish production facilities in different nations
    • Motivations:
      • Increase market share
      • Accessing cheaper labor & lower production costs
      • Utilizing government grants
      • Tax avoidance or reduction
      • Reducing transportation costs
      • Bypassing trade barriers

    Public Sector

    • Focused on delivering high-quality services to all citizens

    • Utilizes taxpayer funds to provide essential services

    • Examples:

      • Police
      • Schools
      • Hospitals
      • Fire brigade
      • Army
      • BBC

    • Ownership and Funding: Owned/controlled by local or national government, financed by taxes.

    Third Sector

    • Aims to support worthy causes, raise awareness, & provide quality services
    • Provides support for food, shelter, clothing, funding, and awareness
    • Organizations:
      • Charities
      • Voluntary Organizations
      • Social Enterprises
      • Co-operatives

    Charities

    • Established to help others
    • Raised finances through donations, sponsorships, and fundraising
    • Not owned by individuals, but are set up as trusts

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    Description

    Explore the different types of business structures, including sole traders, partnerships, and franchises. Learn about the advantages and disadvantages of each to make informed decisions for your business aspirations. This quiz will help deepen your understanding of business management fundamentals.

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