Question 1: Define the term 'sole trader' and explain one advantage and one disadvantage of this business ownership type.

Answer: A sole trader is a business owned and operated by one person. An advantage is that they have full control over decisions; a disadvantage is that they bear all the financial risk alone.

Question 2: Describe how a partnership differs from a sole trader. Mention two key features of a partnership.

Answer: A partnership involves two or more people sharing ownership and responsibility, whereas a sole trader has only one owner. Two key features are shared profits and joint decision-making.

Question 3: List three advantages of setting up a private limited company (Ltd).

Answer: Limited liability for owners, easier to raise capital, and the business has a separate legal identity.

Question 4: List three disadvantages of operating as a public limited company (plc).

Answer: Higher costs due to regulatory requirements, disclosure of financial information, and potential loss of control for original owners.

Question 5: Explain what is meant by 'limited liability' and identify which types of ownerships typically have this feature.

Answer: Limited liability means owners are only responsible for the business's debts up to the amount they invested. This feature is typical of companies such as Ltd and plc.

Question 6: Describe a scenario where a business might choose to be a franchise rather than a sole trader or partnership.

Answer: A business might choose franchising to expand quickly while using an established brand and business model, reducing startup risks.

Question 7: Sketch a simple diagram illustrating the structure of a private limited company, showing the relationship between shareholders, directors, and the company.

Answer: A correct sketch should show shareholders at the top, connected by lines to directors, who are connected to the company, indicating ownership and management hierarchy.

Question 8: Identify and explain one benefit and one risk associated with setting up a business as a franchise.

Answer: Benefit: The franchise benefits from an established brand and support. Risk: The franchisee may have limited control over business operations and branding.

Question 9: Compare the ownership structures of a sole trader and a partnership, focusing on decision-making and profit sharing.

Answer: A sole trader makes all decisions independently and keeps all profits. A partnership involves shared decision-making and profits are divided among partners.

Question 10: Explain why a business owner might choose to incorporate as a limited company instead of remaining a sole trader.

Answer: To benefit from limited liability, access to more capital, and to enhance credibility with customers and suppliers.