Business Structures: Sole Trader and Partnership
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Questions and Answers

What is a key disadvantage of a sole trader business model?

  • Independently owned
  • More capital
  • Easy to set up and start
  • Unlimited liability (correct)

    • In a partnership, decisions can only be made by the majority of partners.

    False

    What is one advantage of a partnership?

    More capital

    In a business partnership, there needs to be a partnership __________.

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

    Match the following business structures with their characteristics:

    <p>Sole Trader = Easy to set up and profit alone Partnership = Requires a partnership agreement Unlimited liability = Owner's personal assets at risk High workload = Common in sole trader businesses</p> Signup and view all the answers

    What is one of the disadvantages of being a franchisor?

    <p>Expensive to provide training and support</p> Signup and view all the answers

    Franchisees have a high degree of freedom in decision-making.

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

    What is one advantage for franchisees when they enter a franchise agreement?

    <p>Less risk</p> Signup and view all the answers

    A franchise allows an operator to trade under the franchisor's name, logo, and __________ process.

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

    Match the following advantages of franchise models with their respective groups:

    <p>Franchisee = Less risk Franchisor = Cheaper method of growth</p> Signup and view all the answers

    What is the main objective of a public corporation?

    <p>Provide public services</p> Signup and view all the answers

    What is a key advantage of private limited companies?

    <p>Limited liability for shareholders</p> Signup and view all the answers

    Public corporations are created by government law.

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

    Public limited companies cannot sell shares to the public.

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

    Name one reason for public ownership of businesses.

    <p>To provide essential goods and services at reasonable prices.</p> Signup and view all the answers

    Public corporations may face challenges such as ______ due to political influence.

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

    What is the main difference between private and public limited companies?

    <p>Public limited companies can sell shares to the public, while private limited companies can only sell shares to family and friends.</p> Signup and view all the answers

    A typical disadvantage of public limited companies is that they must publish their __________.

    <p>financial information</p> Signup and view all the answers

    Match the reason for public ownership with its description:

    <p>Providing essential goods = To ensure affordability for citizens Job opportunities = To create employment in various sectors Serving unprofitable regions = To expand services where private sectors wil not invest Control of strategic industries = To maintain public control over critical services</p> Signup and view all the answers

    Match the following types of companies with their characteristics:

    <p>Private Limited Companies = Maximum of 50 shareholders Public Limited Companies = Can sell shares to the public Both = Limited liability</p> Signup and view all the answers

    What is a feature of a multinational company?

    <p>Up-to-date technology</p> Signup and view all the answers

    Multinational companies operate only in their home country.

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

    Name one benefit of being a multinational company.

    <p>Avoids trade barriers</p> Signup and view all the answers

    Multinational companies enjoy _____________, leading to reduced per-unit costs.

    <p>economies of scale</p> Signup and view all the answers

    Match the following features of multinational companies with their descriptions:

    <p>High sales and profit = Increased revenue generation Employs highly skilled workers = Greater expertise in operations Powerful mass media advertising = Broad reach and recognition Difficult to control = Challenges in management across borders</p> Signup and view all the answers

    Which of the following is considered a factor of production?

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

    One disadvantage of specialization is increased job-related boredom.

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

    What is the role of enterprises in the factors of production?

    <p>They organize land, labor, and capital.</p> Signup and view all the answers

    Labor refers to the ________ involved in production.

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

    Match the following advantages of specialization with their descriptions:

    <p>High output = Increased production efficiency Saves time = Reduction of time wasted in switching tasks Less wastage = Minimized resource waste due to focused production</p> Signup and view all the answers

    What is a primary characteristic of capital intensive production?

    <p>It uses more equipment and machinery.</p> Signup and view all the answers

    Labour intensive production offers more consistency in production compared to capital intensive production.

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

    What is one major disadvantage of capital intensive production?

    <p>Machines can break down</p> Signup and view all the answers

    In labour intensive production, there are more ______ than machinery.

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

    Match the following production types with their respective advantages:

    <p>Capital Intensive = Efficient Labour Intensive = More flexible</p> Signup and view all the answers

    Study Notes

    Sole Trader

    • A sole trader business is owned and operated by one person.
    • Advantages of a sole trader business:
      • Easy to set up
      • Owner makes all decisions
      • Owner keeps all profits
      • Flexible
    • Disadvantages of a sole trader business:
      • Unlimited liability (owner may have to use personal assets to pay business debts)
      • Limited capital
      • Less continuity after owner leaves business
      • High workload

    Partnership

    • A partnership is a business owned and operated by 2-20 people who work together to make a profit.
    • A partnership agreement should be in place outlining:
      • Capital contribution of each partner
      • Profit sharing agreements
      • Rules for adding new partners
    • Advantages of a partnership:
      • Easier to start than other legal business structures
      • More access to capital
    • Disadvantages of a partnership:
      • Conflict can arise between partners
      • All partners are responsible for the actions of each other

    Franchise

    • A franchise is a business model that allows another operator to trade under the name, logo, and processes of an existing business, in exchange for a fee called royalty.
    • The business with the name is the franchisor; the operator is the franchisee.
    • Advantages of franchising for franchisees:
      • Lower risk than starting a new business
      • Lower start-up costs thanks to support from franchisor
      • Established brand image and reputation
      • Provided training and support
    • Disadvantages of franchising for franchisees:
      • Profits are shared with franchisor
      • Less freedom in decision-making
      • High initial investment
    • Advantages of franchising for franchisors:
      • Easy expansion
      • Lower cost of growth
      • Lower risk of failure
    • Disadvantages of franchising for franchisors:
      • Cost of providing training and support
      • Franchisee actions could damage brand reputation
      • Future competition from franchisees

    Limited Companies

    • A limited company is a legally separate entity from its owners (shareholders).
    • There are two types:
      • Private limited companies:
        • Typically small to medium-sized businesses
        • Owned by 2 to 50 shareholders
        • Shares can only be sold to family and friends
        • Advantages:
          • More access to capital
          • Limited liability (shareholders only lose invested capital, not personal assets)
          • More status and perceived legitimacy
          • Directors can be appointed to manage the business
        • Disadvantages:
          • More restrictions to start and close down
          • Profits are shared as dividends
          • Minimum capital is required
          • Can't sell shares to the public
      • Public limited companies:
        • Large companies that can sell shares to the public
        • Advantages:
          • More access to capital
          • Limited liability
          • High status
        • Disadvantages:
          • High start-up costs
          • Profits must be shared as dividends
          • Must publish financial information
          • Can be difficult to control

    Multinational Companies (MNCs)

    • A large private-sector company that operates in more than two countries
    • Features of MNCs
      • Large-scale production
      • Up-to-date technology
      • High sales and profits
      • Extensive mass media advertising
      • Highly skilled workforce
      • Economies of scale
    • Benefits of MNCs:
      • Increases sales and profits
      • Reduces trade barriers
      • Increased brand recognition
      • Economies of scale
    • Limitations of MNCs:
      • High production costs
      • Difficult to manage operations in multiple countries
      • Competition from other multinational corporations

    Public Corporations

    • Owned and controlled by the government
    • Features:
      • Ownership by the government or state
      • Government provides capital
      • Created by law
      • Main objective is to provide public services
    • Reasons for public ownership:
      • Provide essential goods and services at reasonable prices
      • Create job opportunities
      • Provide public services (e.g., healthcare, education)
      • Maintain control of strategic industries (e.g., energy, transportation)
      • Supply goods and services private sector would not provide
    • Reasons against public ownership:
      • Potential for inefficiency
      • Political influence
      • Difficult to control
      • Cost to the government

    Factors of Production

    • Resources used by businesses to produce goods and services.
    • Resources:
      • Land: All natural resources (minerals, water, land)
      • Labour: All human effort involved in production
      • Capital: Man-made resources used in production (machinery, buildings, tools)
      • Enterprise: Individuals who organize the other factors of production to create business ventures

    Specialization

    • Producing a narrow range of products or services
    • Advantages:
      • Higher output
      • Saves time
      • Less wastage
    • Disadvantages:
      • Potential for boredom
      • Increased risk of job-related repetitive strain injuries

    Capital Intensive Production

    • Uses more machinery and equipment than labor for production
    • Advantages:
      • Higher output
      • Consistency in production
      • Efficient
      • Easier to handle large-scale production
    • Disadvantages:
      • Machinery breakdown
      • High capital investment
      • Less flexible

    Labour Intensive Production

    • Uses more human labor than machinery
    • Advantages:
      • Cheaper
      • More flexible
      • Creative
    • Disadvantages:
      • Need for breaks and holidays
      • More difficult to manage a large workforce
      • Human errors can occur

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    Description

    This quiz covers the key aspects of business structures, focusing on sole traders and partnerships. You'll learn about the advantages and disadvantages of each type of business ownership. Understanding these structures is essential for anyone interested in starting their own business.

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