Chapter 4: Types of Business Organisation

The best definition of a sole trader is a business that

• only employs one person
• is owned by one person
• has a single customer
• is a single firm in the industry

One of the advantages of a sole trader business is that

• owners have limited liability
• shares can be sold to raise capital
• decisions and responsibilities can be shared
• the owner has complete control over decision making

One disadvantage of a sole trader business is that

• capital is limited to the owner's savings and bank loans
• decisions take too long to make
• owners may disagree 

One of the advantages of a partnership is that

• all partners have limited liability
• shares can be sold on the Stock Exchange
• the business can survive the death of the partners
• the business has access to more capital than a sole trader

Which of the following is not a feature of a private limited company?

• Shares can be issued to raise capital
• Shares can be bought  and sold on the Stock Exchange
• All owners of the business have limited liability
• The business continues after the death of a shareholder

The main reason why an entrepreneur will convert an LTD into a PLC is

• they don't want to remain in the private sector
• they want to gain the benefits of limited liability
• they want to keep the annual accounts secret
• they want to raise additional capital to expand the business

One of the main disadvantages of a PLC is the

• loss of control by the owners as additional shares are sold
• firms in the public sector are often less efficient
• possibility that if a company fails owners might lose assets

Which of the following statements about PLCs is most true

• The firm is owned and controlled by the workers
• The firm is owned by the directors but run by shareholders
• The firm is owned by shareholders and run by directors
• The firm is owned and controlled by the government

One of the reasons an entrepreneur might buy a franchise is

• it is cheaper than setting up a new business venture
• there is complete control over important decisions
• the risk of failure is lower

What is the advantage to a business of selling a franchise license to franchisee?

• The business can expand more quickly
• The franchisor owns all of the shops
• The business buying the franchise is likely to be successful