1.4.1 - Options for start-up and small businesses

Which of the following best describes the term limited liability? If the business fails:

• Personal possessions of the owner can be taken to pay any debts

• The owner is personally liable for all the debts of the business

• There is no limit on the amount the owner has to pay to settle debts

• The owner only loses the amount invested in the business

Five people have come together to start a business which has unlimited liability. Which type of business ownership have the entrepreneurs decided for their start-up?

• Sole trader

• Partnership

• Private limited company

• Public limited company

An individual wants a quick, easy and inexpensive way to start-up a small business. In this situation, which of the following types of organisation should the individual select for his start-up?

• Sole trader

• Partnership

• Private limited company

• Franchise

Which of the following is an advantage of operating a business as a private limited company?

• It is easier to raise finance as the business can sell shares

• Owners have unlimited liability

• Partners can provide specialist knowledge and skills

• It is very quick and easy to set up

The agreement for one business to trade under another business’ name is called a:

• Sole trader

• Partnership

• Private limited company

• Franchise

A business has decided to expand in the UK through opening two new franchises. The forecast revenue over the next 3 years per franchise is shown in the table below.

The franchisee will pay a royalty of 8%. How much will the franchisor receive in total in royalties in the next 3 years?

• £3,600

• £17,600

• £35,200

• £220,000

Which of the following is always considered a disadvantage of setting up a business as a partnership in comparison to starting up as a sole trader?

• Shared losses

• Shared workload

• Shared profit

• Shared responsibility

Which of the following organisations is most likely to sell shares for sale to invited investors?

• Sole trader

• Partnership

• Private limited company

• A business with unlimited liability

The most likely reason for a sole trader to change into a private limited company is because it wants:

• To share its financial accounts with the public

• To raise additional finance

• To benefit from unlimited liability

• To avoid business continuity

Which of the following is a disadvantage of being a private limited company?

• It has a separate legal identity and therefore has continuity

• Control is kept over who buys shares in the company

• Shareholders’ personal possessions cannot be taken to pay any debts

• A summary of the business’s accounts can be viewed by the public