O-LevelCommerceBusiness enterprise7100/22 · May/June 2013 · Q420 Marks

There are several types of business organisation: SOLE TRADER PARTNERSHIP PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY

(a)(i)Identify one type of business organisation listed above to which the following features apply: unlimited liability[1]
(a)(ii)Identify one type of business organisation listed above to which the following features apply: separate legal existence[1]
(a)(iii)Identify one type of business organisation listed above to which the following features apply: shareholders[1]
(a)(iv)Identify one type of business organisation listed above to which the following features apply: one owner.[1]
(b)(i)Which type of business organisation listed above would be most suitable for the following businesses? Give a reason for each of your choices. (Do not use the same type of business organisation more than once.) Two friends wishing to start a dental practice.[2]
(b)(ii)A small family business wishing to involve other members of the family in the business operations.[2]
(c)(i)Why is a Deed of Partnership important when setting up a partnership?[3]
(c)(ii)A new Deed of Partnership needs to be sent to the partners of a business. Why would you use registered post rather than letter post to send this document to the partners?[3]
(d)Most multinational companies are set up as public limited companies. Is this advisable? Give reasons for your answer.[6]

Mark scheme

Marking points from the official mark scheme (May/June 2013). The mark or mark type is shown in brackets.

[1] (a) One mark for a correct answer in each of the following part questions –
(i) sole trader/partnership
[1] (a) (ii) private limited company/public limited company
[1] (a) (iii) private limited company/public limited company
[1] (a) (iv) sole trader
[2] (b) One mark for the business organisation and 1 mark for the reason in each of the following part questions –
(i) partnership – capital needed from the two owners, share work load, as receive share in profits likely to work hard to make these profits, greater expertise
allow private limited company
[2] (b) (ii) private limited company more capital available from family members, protection of limited liability for shareholders, greater expertise from family, shareholding cannot be transferred without consent of other shareholders
allow partnership
any other relevant point
[3] (c) (i) Any three points × 1 mark each –
legal document
it sets out the terms and conditions of the business
such as the duties of each partner/how the profits are to be shared/capital contributed by each partner (1 max)
future difficulties/disagreements may be more easily resolved
enables the partnership to run more smoothly
any other relevant point
[3] (c) (ii) Any three points × 1 mark each –
it is a valuable/important document
registered post provides proof of posting and proof of delivery
the document can be tracked between posting and delivery
a signature is required when it is delivered
registered post is more secure
compensation
NB accept negative comments about letter post such as it is insecure
any other relevant point
[6] (d) Level 2 (4-6 marks) Has discussed whether or not multinational companies should be set up as public limited companies and has given a reasoned opinion. Multinational companies are very large companies with branches in many countries and a head office often located where the company originated. Most are public limited companies quoted on stock exchanges. This gives them certain advantages. They are usually in industries that require large amounts of investment and so they are able to raise the capital needed by issuing shares on stock exchanges. These companies are subject to company legislation and their shareholders have limited liability so their personal possessions are not at risk if the business fails. These shareholders are therefore more likely to invest as they regard multinational companies as a safe investment. Being public limited companies means that they are a separate legal entity, separate from the owners, the shareholders. They can, therefore, be sued in their own name if something goes wrong. With businesses of such immense size, it is important that continuity is assured. Even if shareholders sell their shares or directors leave the company, the multinational will continue. As these companies operate in many different countries they may be subject to the company legislation of the countries in which they are located. This may cause some confusion. They employ thousands of people worldwide and seek expansion wherever they can find it. It is important that they are organised in a stable and transparent way as public limited companies so that they can function successfully in the global economy. (Micro-multinationals have also developed. These are small companies who market their products or services worldwide using the Internet. They are unlikely to be public limited companies but, with expansion, may develop into public limited companies). Level 1 (1-3 marks) Has commented on multinational companies with/without comment on them being set up as public limited companies. Multinational companies are very large companies. They have a head office in one country and offices or factories in many other countries. They are often set up as public limited companies. They can raise large sums of money on a stock exchange. Their shareholders have limited liability.