Private and Public Limited Companies
Homework Sheet
1. Each of the following phrases below relates to either shares or dividends. Copy the
outline table into your books and write each phrase in the appropriate column:
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Gives the owner voting rights
Issued as a way of raising finance for the business
A payment made to shareholders
The amount can vary from year to year depending on the success of the business
The value can go up or down over time
Allows the owner to attend the annual general meeting of the company
Gives the owner part ownership of the business
Is usually paid twice a year
Dividend
Share
Exam practice questions
1. Gerald Marsh and his wife are concerned about their farm’s future as a partnership and
are thinking of forming a private limited company.
a) Explain why Gerald and his wife may wish to change the business from a partnership
to a private limited company. (4 marks)
b) Explain how the owners of the partnership could be affected if a private limited
company were formed. (4 marks)
2. Many retailers of chocolates are small independent sole traders whilst the companies
which make chocolates are large public limited companies. Are these appropriate forms
of ownership for these different businesses? Give reasons for your answers. (7 marks)
Advice on how to answer the exam questions
1. a) You will need to provide reasons explaining the advantages of changing the business
to a private limited company. Your answer will be improved if you explain why and how
the change to private limited company overcomes some of the disadvantages of
partnerships.
b) This question requires you to provide an answer which concentrates on who owns the
business and the way in which these owners will be affected by the change of company
organisation.
2. To answer this question successfully you will need to consider and explain why there are
so many sole trader-type businesses which are reasonably small in size. You should also
consider the advantages of this particular form of business organisation. An explanation
of why the plc form of business organisation is particularly suited to a very large business
will also be required