Business Structure

Who owns and who controls a public limited company? Explain why this distinction might lead to conflict.

• Shareholders are the owners of a public limited company, but they appoint a board of directors who control and make decisions of the business.

• This distinction might lead to conflict because owners and directors might have different objectives.

• For example, the owners want to use profit to take over another business whereas the directors want to use that profit to invest back into the firm.

• All is correct.

Why might the directors of a public limited company decide to convert the business back into a private limited company by buying a majority of the shares?

• This is because they want to overcome the divorce between ownership and control.

• The shareholders who hold majority of the company's shares want to gain control of the business instead of letting the board of directors decide.

• All is true.

How does limited liability make it easier for companies to raise finance?

• Limited liability makes it easier for companies to raise finances because people can buy shares of the business and become shareholders.

• Limited liability can't raise finance.

Using examples of a sole trader and a public limited company, explain how the relationship between ownership and control differs in these two types of organisations.

• Sole trader business - single owner has complete control.

• Public limited company - the shareholders own the company, but the board of directors controls the company.

• Sole traders have unlimited liability while limited companies have the benefit of limited liability.

• All is correct.

Using examples of partnership and a public limited company, explain how the legal structure of a business affects in ability to raise finance.

• Partnership - additional capital is injected by each partner, but it is not possible to raise capital from selling shares.

• Public limited company - offer shares to the public to buy in order to raise capital.

• All is correct.

What is the difference between private-sector and public-sector organization?

• Private-sectors organizations are owned and controlled by individuals, while public-sector organization are owned and controlled by the government.

• They have different aim: private-sector organizations usually work towards profit, and public-sector organization would want to provide essential service to the community and meet break-even point at the least.

• All is correct.

Explain how legal identity and continuity help business and companies to operate effectively.

• 'Legal identity' is a company legally recognised as having an identity separate from that of it's owners.

• Legal identity/personality help businesses operate efficiently because they protect the company from collapsing due to a lack of an owner/director.

• All is correct.

sole traders have

• full control and personal liability

• shared control with partners

• full control but limited liability

• limited control and no liability

partners who only invest capital but don't run the business are called limited partners or

organisational chart

• referts to the role of the CEO

• illustrates the company hierarchy and the different department

• organises only the chain of command

• shows the responsibilities of each department