What does unlimited liability make a business owner personally responsible for?
The business’s debts.
What can an owner with unlimited liability lose to repay business debts?
Personal possessions.
What limits an owner's financial loss under limited liability?
The amount invested in the company.
What does limited liability protect from company debts?
The owner's personal possessions.
What legal identity does a sole trader or partnership have apart from its owners?
None; it has no separate legal identity.
Who is responsible for debts and liabilities after a company is incorporated?
The separate company.
What defines a sole trader’s ownership and control?
One owner controls decisions and keeps all profits.
What liability do sole traders face for business debts?
Unlimited liability.
What defines partnership ownership and contributions?
More than one owner can contribute different skills, experience, and start-up capital.
Where are a private limited company’s shares unavailable for public purchase?
On the stock exchange.
How can a public limited company raise capital through its shares?
By offering shares to the public.
What can PLC flotation increase besides access to investment?
The company’s public profile.
What is a joint venture?
An agreement in which businesses collaborate on a specific project while remaining separate companies.
What growth opportunities can joint ventures provide?
Access to new markets, combined strengths, shared costs and risks, and faster growth.
What challenges can joint ventures create?
Conflicts, cultural clashes, shared profits, and legal costs and complexity.
What does a social enterprise trade to address?
Social problems, community improvement, or environmental improvement.
Who owns and controls a co-operative?
Its members, such as workers, consumers, or producers.
What does a franchise allow a franchisee to do?
Trade under an existing brand using its business model.
How does a franchisee pay the franchisor for a franchise?
A fee or royalty.
What ready-made advantages does a franchise offer franchisees?
An established brand, suppliers, tested products, and training.
Why might franchisees obtain more favourable loans?
The business has a lower risk of failure.
What can changing from a sole trader to a partnership provide?
New skills, finance, experience, and shared workload and decisions.
What control-related drawbacks can follow a sole trader’s move to a partnership?
The owner gives up sole control, shares profits, and may face slower decisions or arguments.
What can changing from a sole trader to an LTD provide?
Limited liability, more potential capital, easier investor access, and improved continuity.
What drawbacks can follow a sole trader’s move to an LTD?
The owner shares profits, consults others, loses independence, and faces slower decisions, published financial information, and extra costs.
What can becoming a PLC provide through public investment?
Significant investment, improved finance access, brand recognition, reinvestment, and economies of scale.
What does incorporation register a business as?
A company.
What legal separation does incorporation create?
A separate legal entity between the company and its shareholders.
What setup advantage do sole traders generally have?
They are easy and generally inexpensive to set up.
What financial reporting requirement applies to sole traders?
They do not have to publish financial accounts.
What does a Deed of Partnership specify about partners’ roles?
Their roles and responsibilities.
What workload and decision-making benefit do partnerships offer?
Partners can share the workload and decision-making.
What can partnership disagreements lead partners to do?
One or more partners may leave.
How much are LTD and PLC shareholders liable for?
Their investment.
How does an LTD keep ownership and decision-making within a select group?
By raising share capital among a select group of shareholders.
What must LTDs publish annually?
Basic financial information.
What is one major financial cost of PLC flotation?
Flotation is expensive.
What risk can PLCs face from greater shareholder influence?
Takeover risk.
What do joint-venture partners share?
Resources and risks.
Which Chinese company partnered with Jaguar-LandRover to enter China's car market?
Chery.
Which three organisations are examples of social enterprises?
The Big Issue, Divine Chocolate, and the Eden Project.
How many votes does each co-operative member receive?
One vote, regardless of position.
What do co-operatives prioritise over maximising profit?
Meeting member needs.
How may co-operatives use surplus profits?
They may reinvest them or distribute them to members.
How can shared benefits motivate worker co-operative members?
They give members a stake in the co-operative’s success.
What recruitment challenge can equal wages pose for worker co-operatives?
They may deter highly skilled recruits.
Who controls the business name, suppliers, pricing, advertising, appearance, and products in a franchise?
The franchisor.
How does franchising help franchisors expand rapidly?
Franchisees bear much of the risk.
How are annual franchise royalties normally calculated?
As a percentage of turnover.
What control-related risk do franchisors face?
They may lose day-to-day control and suffer brand damage.
Why might a business change its legal structure?
As it grows, develops, or its owners’ aims change.
How can a PLC regain control over its decisions?
It can delist from the stock exchange and buy back shares.
What can external events do to a company’s share valuation and takeover risk?
They can lower its valuation and make it more vulnerable to takeover.
Why may public-sector organisations provide services that would otherwise be unavailable?
They may provide key services unavailable from other providers.
What is not the primary focus of public-sector organisations?
Profit.
What are three potential drawbacks of public-sector organisations?
Weaker efficiency incentives, less competition, and tax revenue spent that could be used elsewhere.
Answer 20 questions on Business Ownership Structures.
1. A sole trader cannot repay a business loan, and the business has no assets left. What may happen to the owner's personal possessions?
2. An owner invests $20,000 in a company that later cannot pay its debts. Under limited liability, what is the owner's maximum financial loss from the company debts?
Go over the full study guide for Business Ownership Structures.
Read the study guide →Upload your class notes and Revizly writes your flashcards in about a minute.
Flashcard maker