1.4 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

The main reason why an entrepreneur will convert a Private Limited Company into a Public Limited Company

• 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 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

One of the disadvantages of an entrepreneur buying a new franchise is

• the profits of the franchisor's business will be lower

• a share of the set up costs will be paid to the franchisor

• not all decisions are made by the franchisee

• consumers are less likley to have heard of the franchise

All of the following are advantages of joint ventures except

• The cost of a new project can be split between companies

• Manufacturing costs will be divided between the firms

• The firms can focus on what they know best

• Management of a joint venture might cause disagreement

2. Mario and his brother Luigi started a plumbing company together. They split the profits and the expenses.

• Sole Trader

• Partnership