State the meaning of a sole trader. [2 marks]
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A sole trader is a business owned and managed by one person. (1 mark) The owner has unlimited liability for the business's debts. (1 mark)
Identify two features of a private limited company. [2 marks]
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A private limited company has limited liability for its shareholders. (1 mark) It cannot sell shares to the public and has a maximum of 50 shareholders. (1 mark)
Explain the difference between a franchise and a joint venture. [3 marks]
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A franchise is a business model where a franchisor grants a franchisee the right to use its brand, products, and business methods in exchange for fees and royalties. (1 mark) A joint venture is a strategic alliance where two or more businesses agree to work together on a specific project or business activity, sharing resources, risks, and profits. (1 mark) Unlike a franchise, a joint venture involves shared ownership and management between the partnering businesses. (1 mark)
Analyse the advantages and disadvantages of a partnership. [4 marks]
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Advantages of a partnership include: (1 mark) Shared financial commitment and resources, which can help the business grow. (1 mark) Disadvantages of a partnership include: (1 mark) Potential for disagreements between partners, which can affect decision-making and business operations. (1 mark) Unlimited liability for partners, which means their personal assets can be used to pay off business debts.
Evaluate the suitability of a public limited company for a new technology startup. [6 marks]
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A public limited company (PLC) is suitable for a new technology startup for several reasons: (1 mark) Access to capital: A PLC can raise funds by selling shares to the public, which can be beneficial for a technology startup that requires significant investment for research and development. (1 mark) Limited liability: Shareholders have limited liability, which means their personal assets are protected in case the business fails. (1 mark) However, there are also some challenges to consider: (1 mark) Regulatory requirements: PLCs are subject to stricter regulatory requirements and disclosure obligations, which can be time-consuming and costly. (1 mark) Potential loss of control: As the number of shareholders grows, the original founders may lose some control over the business. (1 mark) In conclusion, a PLC can be a suitable option for a technology startup that requires significant capital and has growth potential, but it is essential to weigh the advantages and disadvantages carefully. (1 mark)
Discuss the factors that a business owner should consider when choosing between a sole trader and a partnership. [8 marks]
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When choosing between a sole trader and a partnership, a business owner should consider the following factors: (1 mark) Financial resources: A sole trader has unlimited liability, which means their personal assets can be used to pay off business debts. (1 mark) A partnership allows for shared financial commitment and resources, which can help the business grow. (1 mark) Management and decision-making: As a sole trader, the owner has full control over the business and can make decisions quickly. (1 mark) In a partnership, decisions may be slower as they require agreement between partners. (1 mark) Skills and expertise: A partnership can bring together individuals with complementary skills and expertise, which can benefit the business. (1 mark) However, disagreements between partners can arise, affecting the business's operations. (1 mark) In conclusion, the choice between a sole trader and a partnership depends on the business owner's financial situation, management style, and the skills and expertise required for the business. (1 mark) It is essential to weigh the advantages and disadvantages of each option carefully before making a decision. (1 mark)