Cambridge IGCSE · Business Studies (0450)

Types of business organisation: Practice Questions

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

10 questions25 marksFree, no account

Question 1

1 mark

Which of the following business organisations is typically owned and controlled by its members, who share in the profits or benefits based on their use of the entity's services rather than their capital investment?

Question 2

1 mark

What does it mean for a private limited company to be an 'incorporated' business?

Question 3

1 mark

An enterprising individual operates a successful bakery as a sole trader. They plan to expand to many locations but want to protect their personal property from business debts. Which transition is most appropriate?

Question 4

1 mark

In the context of franchising, what is the 'royalty fee'?

Question 5

1 mark

What is a common feature regarding the distribution of profits (surplus) in a co-operative?

Question 6

2 marks

State one disadvantage of operating as a sole trader regarding the owner's personal responsibility for business debts.

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Question 7

3 marks

Explain the main difference between an unincorporated business and an incorporated business in terms of their legal identity.

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Question 8

5 marks

Evaluate one reason why a franchisor might experience a conflict with a franchisee regarding the management of a global fast-food brand.

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Question 9

4 marks

Most new entrepreneurs start their businesses as unincorporated organisations.

a) Identify two main differences between a sole trader and a partnership.
b) Explain the meaning of unlimited liability and why it is a significant risk for these types of business owners.

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Question 10

6 marks

Tariq and Maya run a successful artisanal bakery as a partnership. They are planning to expand their operations to open three new locations across the region, which requires a large capital investment. They are currently deciding between two alternative business structures to facilitate this expansion:

Option 1: Form a private limited company (Ltd).
Option 2: Operate as a franchisor by selling franchises of their bakery concept.

(a) Explain one major disadvantage of continuing to operate as an ordinary partnership during a large-scale expansion.

(b) Evaluate the advantages and disadvantages of Option 1 (private limited company) and Option 2 (franchising) for Tariq and Maya. Recommend which option they should choose to achieve sustainable expansion while protecting their business interests.

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