IB Diploma Programme (DP) - SL & HL · Business management

1.2 Types of business entities: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on 1.2 Types of business entities.

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Question 1

1 mark

What is the key difference regarding share transfers between a private limited company (Ltd) and a public limited company (plc)?

Question 2

1 mark

A private limited company is evaluating whether to register as a for-profit social enterprise by formalizing a triple bottom line approach. Which of the following describes the most significant strategic implication of this change?

Question 3

1 mark

Governments often use Public-Private Partnerships (PPPs) for large infrastructure projects like bridges or hospitals. Which of the following is a significant risk associated with this type of business entity for the public sector?

Question 4

1 mark

What is the main objective of a public sector organization?

Question 5

1 mark

A successful retail chain operating as a private limited company wants to finance a massive national expansion program. The directors decide to convert into a public limited company (plc) through an Initial Public Offering (IPO).

Which of the following describes the most significant governance risk created by this conversion?

Question 6

2 marks

State two defining features of a charity.

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Question 7

3 marks

Explain one reason why a fast-growing private limited company might deliberately choose not to float its shares on a public stock exchange.

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Question 8

2 marks

Define the term unlimited liability.

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Question 9

8 marks

A high-tech startup, Nexus Robotics, is currently operating as a partnership between three engineers. To fund a major expansion into AI-driven logistics, the partners are debating whether to convert the business into a private limited company or a public limited company (PLC).

(a) Outline two legal differences between a partnership and a private limited company. [2]
(b) Explain two advantages for Nexus Robotics of staying as a private limited company rather than becoming a public limited company. [4]
(c) Evaluate the decision for Nexus Robotics to undergo an Initial Public Offering (IPO) to become a public limited company. [6]

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Question 10

10 marks

A group of three specialized software engineers are currently operating as a partnership called InnovateTech. They have experienced rapid success and are now considering changing their legal structure to either a private limited company or a public limited company to facilitate further expansion.

(a) Define the term partnership. [2]
(b) Explain two advantages for InnovateTech of changing its legal status from a partnership to a private limited company. [4]
(c) Evaluate the decision for InnovateTech to skip the private limited company stage and directly become a public limited company. [4]

Write your answer out first, then check it against the worked solution.

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