Lesson 1.3.1

1.3.1 Legal Structures Quiz: NCFE Business & Enterprise, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

This lesson compares the main ways a UK business can be owned: sole trader, partnership, franchise, private limited company, public limited company and co-operative. For each it looks at who owns it, how control works, what happens to profits and how far owners are liable when debts cannot be paid.

Key points

  • A sole trader is the single owner, keeps all the profit and has unlimited liability for the business debts.
  • A partnership has two to twenty owners, and a deed of partnership fixes profit shares, roles and how disputes are handled.
  • A franchisee pays an upfront fee plus a share of sales to trade under the franchisor's brand and business model.
  • A limited company is owned by shareholders and run by directors, and limited liability protects personal assets.
  • Profit paid out to shareholders is called a dividend, and is not a cost like wages or interest.
  • Only a PLC can offer its shares to the public on a stock exchange, which lets it raise very large sums.
  • A co-operative is owned by its members with one vote each, but decision-making can be slow.

Key terms

Sole trader
A business owned and run by one person who is not legally separate from it.
Unlimited liability
The owner is personally responsible for all business debts, including through their own property.
Limited liability
Shareholders can lose only the money they put in, not their personal assets.
Deed of partnership
A private agreement between partners setting out profit shares, duties and what happens if someone leaves.
Franchise
A licence to use another firm's brand, products and methods in return for fees and a share of sales.
Dividend
A payment of profit to shareholders, paid per share they own.
Co-operative
A business owned by its members, each with one equal vote whatever they have invested.

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The 20 questions

  1. Jaz owns and runs a mobile nail bar by herself. What type of business ownership is this?

    • Partnership
    • Sole trader
    • Private limited company
    • Franchise

  2. What is the legal liability status of a sole trader?

    • Exempt from debt
    • Shared incorporation
    • Unlimited liability
    • Limited liability

  3. What does a deed of partnership legally establish for a firm?

    • State pension plans
    • Profit shares
    • Public share sales
    • Corporate tax rates

  4. What payment does a franchisee make to a franchisor?

    • Corporation dividends
    • Government grants
    • Director salaries
    • Franchise fees

  5. Who legally owns a private limited company?

    • Shareholders
    • Creditors
    • Employees
    • Directors

  6. What is a major advantage of floating as a public limited company?

    • Selling public shares
    • Retaining full control
    • Avoiding company audits
    • Guaranteed state bailouts

  7. Staff at a bakery jointly own the business and share its profits. Which type of co-operative is this?

    • Worker co-operative
    • Housing co-operative
    • Producer co-operative
    • Consumer co-operative

  8. What is a common disadvantage of operating as a co-operative?

    • High corporation tax
    • Slow decision-making
    • Mandatory stock market listing
    • Unlimited personal liability

  9. What is the liability status of members in a registered co-operative?

    • Direct sole liability
    • Unlimited liability
    • Limited liability
    • Personal bankruptcy

  10. What is a key advantage of starting as a sole trader?

    • Large capital reserves
    • Limited legal liability
    • Quick and cheap setup
    • Easy share sales

  11. What primary benefit does a sole trader keep that company owners often split?

    • Unlimited bank loans
    • Exemption from tax
    • Total profit and control
    • Free supplier delivery

  12. What financial risk does a sole trader face due to unlimited liability?

    • Fixed corporation tax
    • Personal asset loss
    • Guaranteed wage loss
    • Mandatory board debt

  13. How is ownership typically structured in an ordinary partnership?

    • Unlimited public shareholders
    • Two to twenty people
    • One single owner
    • Fifty to five hundred

  14. What does a deed of partnership help prevent between business partners?

    • Arguments and disputes
    • Supplier inflation
    • Customer complaints
    • Corporation tax bills

  15. What does a franchisee purchase in a franchise agreement?

    • Complete company ownership
    • Licence to use brand
    • Exclusive patent rights
    • Freehold company shares

  16. What is a major financial drawback of running a business as a franchise?

    • Zero brand awareness
    • Full product control
    • Unlimited business debts
    • Royalty payments

  17. What does limited liability protect a private limited company owner from losing?

    • Initial investment
    • Share value
    • Personal assets
    • Business profits

  18. What is a profit payment made to company shareholders called?

    • Interest
    • Retained profit
    • Wages
    • Dividend

  19. Which business type can sell shares to the general public?

    • Private limited company
    • Sole trader
    • Public limited company
    • Worker co-operative

  20. How are voting rights allocated in a standard co-operative?

    • By salary size
    • By hours worked
    • By share value
    • One equal vote

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