CH20Mindmap

Ch20 Business Organisations – Gavin Duffy Business

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🏢 Ownership Structures

Sole Trader

Formation

Start straight away in own name or register a business name with the CRO (Companies Registration Office).

Liability

Unlimited liability — the owner is personally responsible for all debts. Personal assets can be seized.

Finance / Control / Drawback

Finance: Limited to own savings or loans.
Control: Total control — owner makes all decisions.
Drawback: Not a separate legal entity — business ends on death of owner.

Partnership

Formation

LP1 form must be completed for the CRO. A deed of partnership should be drawn up by a solicitor.

Liability / Finance / Control

Liability: Unlimited liability shared between partners.
Finance: 2–20 partners can invest savings plus loans.
Control: Decisions shared between partners.
Drawback: Not a separate legal entity — ends on death of partner.

Private Limited Company (LTD)

Formation

Articles of Association, minimum 1 director, between 1 and 149 shareholders. Registered with the CRO.

Key Benefits

• Limited liability — shareholders only lose their investment
• Separate legal entity — company can sue/be sued, not the owner
• Continuity of existence — continues after death of a shareholder
• Corporation tax at 12.5% (vs 20/40% PAYE for sole traders)

Finance / Control

Finance: Can sell shares to up to 149 shareholders.
Control: One share one vote. Board of directors elected; they appoint a CEO.

DAC (Designated Activity Company)

DAC Key Facts

Formation: Articles + Memorandum of Association; min 2 directors.
Liability: Limited liability.
Control: Legal obligation to hold an AGM.
Benefit: Separate legal entity. Used when a specific purpose/activity must be defined.

Co-operative

Co-operative Key Facts

Formation: At least 7 members; apply to Registrar of Friendly Societies.
Liability: Limited liability.
Control: Democratic — one member, one vote.
Benefit: Not for profit — for mutual benefit of members. E.g. Credit Union offers cheaper rates.

Public Limited Company (PLC)

PLC Key Facts

Min 7 shareholders, unlimited maximum. Shares sold on the Stock Exchange.
✓ Listing boosts exposure; attracts top staff; access to large capital.
✗ Expensive to float; greater financial reporting; easier to take over; share price can be volatile.

🔄 Reasons to Change Ownership Structure

Limited Liability

Move from unlimited to limited liability — e.g. sole trader becomes a private limited company. Owners' personal assets are then protected.

Continuity of Existence

A sole trader or partnership ceases on death of the owner. A limited company has continuity of existence — it survives regardless of changes in ownership.

Expansion / Access to Capital

A limited company can have up to 149 shareholders vs a partnership's 2–20. More investors means more capital for growth. A PLC can raise even more via the stock exchange.

Tax Benefits

A limited company pays Corporation Tax at 12.5% on profits. A sole trader or partner pays income tax at 20%/40% — significantly more.

Separate Legal Entity

A company can sue and be sued in its own name, rather than the individuals that make up the partnership or the sole trader themselves.

🏛️ Privatisation vs Nationalisation

Privatisation

The selling of a government-owned business to private investors. E.g. Aer Lingus was government owned and sold to private investors (now owned by IAG).

Nationalisation

The government takes ownership of a previously private business. E.g. Bank of Ireland and AIB were partly nationalised during the 2008 financial crisis.

Benefits of Privatisation

• Increased government revenue from the sale
• Improved efficiency — private firms are profit-driven
• More finance to expand — access to loans and shares
• Increased competition — deregulation lowers prices

Drawbacks of Privatisation

• Loss of state assets — sold permanently
• Loss of government control over essential services
• Increased unemployment as private firms cut costs
• Consumers may face higher prices as profit replaces public service

🍔 Franchise (Starting as a Franchisee)

What is a Franchise?

The franchisor grants a licence to the franchisee to sell its products/use its business idea in return for an upfront fee and a % of profits. E.g. McDonald's, Subway, Insomnia, Supermac's.

Benefits for Franchisee

• Proven business idea — reduced risk of failure
• Existing customer base and brand loyalty
• Economies of scale — cheaper supplies from franchisor
• Training and mentoring provided

Drawbacks for Franchisee

• More expensive — ongoing fees and % of profits
• Restricts innovation — must follow franchisor's rules
• Territory restrictions — limited area of operation
• Brand reputation can be damaged by other franchisees

🇮🇪 Indigenous Firms

Indigenous Firm

An Irish-owned and Irish-based firm, established and managed by Irish residents operating primarily in Ireland. E.g. InterSport Elverys, Tayto, Ornua, Kerry Group.

Benefits

• Loyal to Ireland — less likely to relocate
• Creates jobs for Irish workers
• Profits remain in Ireland — reinvested locally
• Role models and cultural identity
• Contributes to exports

Challenges

• Increased costs — energy, wages rising
• Competition from MNCs/FDI — large multinationals with greater economies of scale
• Shortage of labour — difficulty recruiting skilled staff
• Lack of economies of scale compared to large international firms

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2025 Q2(A)Illustrate: Partnership, Sole Trader, Franchise, PLC. (20)▼

Illustrate your understanding of the following types of business organisations: Partnership, Sole Trader, Franchise, Public Limited Company. (20 marks — 4@5, (4+1)/(3+2) — Explain + Example)

✏️ Suggested Answer

Partnership: A form of business where two or more people share ownership and responsibility. Partners receive profits and are liable for debts based on the partnership agreement. Unlimited liability applies. E.g. a solicitors' practice or accountancy firm.

Sole Trader: A business owned and run by one person who is fully responsible for all debts. The sole trader makes all decisions, keeps all profits but has unlimited liability. E.g. a local plumber or farmer.

Franchise: The franchisor grants a licence to the franchisee to use the business model, sell goods and services under the franchise name in exchange for a fee and a percentage of profits. E.g. McDonald's, Subway, Insomnia.

Public Limited Company (PLC): A company publicly listed on the Stock Exchange. Shares can be offered to the general public. Minimum 7 shareholders with no maximum. E.g. Glanbia plc, Kerry Group plc, Ryanair Holdings plc.

📌 Illustrate = Explain + Example. The MS awards (4+1) for the first two and (3+2) for the last two — meaning the example is worth 1–2 marks in each case. Never skip the example.

2024 Q7(B)Sole Trader vs Limited Company. (20)▼

Compare the features of a Sole Trader and a Private Limited Company as forms of business ownership. (20 marks)

✏️ Suggested Answer — Compare under headings

Liability: A sole trader has unlimited liability — personal assets are at risk. A private limited company has limited liability — shareholders only lose their investment.

Legal Status: A sole trader is not a separate legal entity — the owner IS the business. A Ltd company is a separate legal entity — it can sue and be sued in its own name.

Finance: A sole trader is limited to own savings and loans. A Ltd company can sell shares to up to 149 shareholders, accessing far more capital.

Tax: A sole trader pays income tax at 20%/40%. A Ltd company pays corporation tax at 12.5% — significantly lower.

Continuity: A sole trader business ceases on death of the owner. A Ltd company has continuity of existence — continues regardless of ownership changes.

📌 Compare = show similarities AND differences. Using headings (Liability, Legal Status, Finance, Tax, Continuity) earns better structure marks. Make sure each heading addresses BOTH types.

2023 Q2(A)Distinguish privatisation vs nationalisation + benefit/challenge. (20)▼

(i) Distinguish between nationalisation and privatisation. Use examples. (10 marks)
(ii) Describe one benefit and one challenge of privatisation. (10 marks)

✏️ Part (i) — Distinguish

Privatisation: The selling of a government-owned business to private investors. The state gives up ownership in return for revenue. E.g. Aer Lingus sold to private investors — now part of IAG.

Nationalisation: The government takes ownership of a previously private business, usually to protect jobs or stabilise an essential service. E.g. Anglo Irish Bank nationalised during 2008 crisis.

✏️ Part (ii) — Benefit + Challenge

Benefit — Increased government revenue: Selling a state enterprise provides a large sum of money to fund public services or repay national debt.

Challenge — Loss of control: Once privatised, the government loses direct control over how the service is run. Profit motive may conflict with public interest.

📌 Distinguish = show the difference. Both definitions must clearly show they are OPPOSITE concepts — privatisation = government sells; nationalisation = government buys/takes over.

2023 Q2(B)Reasons to change ownership structure over time. (20)▼

Outline why a business, over time, might change their ownership structure. Provide examples. (20 marks — 2@7(2+3+2) 1@6(2+2+2))

✏️ Suggested Answer

Limited liability: Move from unlimited to limited liability. E.g. a sole trader becomes a Ltd to protect personal assets from business debts.

Access to capital: A limited company can raise more capital by selling shares — up to 149 shareholders in a Ltd, or unlimited via a PLC. E.g. a partnership converts to a Ltd to bring in more investors.

Tax benefits: Changing to a Ltd allows the business to avail of corporation tax at 12.5% rather than income tax at 20%–40%. E.g. a highly profitable sole trader converting to a Ltd.

📌 This Q requires examples. The MS specifically allocates marks for a relevant example per point (the +2). Always give a practical scenario showing the change.

2023 SQ1 / 2020 SQ6Indigenous firm — explain + two challenges. (Short Q)▼

InterSport Elverys is an Irish indigenous firm.
(a) Explain the term indigenous firm. (4 marks)
(b) Outline two challenges experienced by an indigenous business. (6 marks)

✏️ Suggested Answer

Indigenous firm: A business that is owned by residents of the country it operates in. An Irish indigenous firm is established and managed by Irish residents and operates primarily in Ireland. E.g. InterSport Elverys, Tayto, Ornua.

Challenge 1 — Competition from MNCs: Large transnational companies develop large economies of scale, allowing them to offer lower prices. Indigenous firms struggle to compete on price.

Challenge 2 — Rising operating costs: Increases in energy costs and wages have led to increased expenses and lower profit margins for indigenous businesses.

📌 2026 must-know short Q topic. Definition (4 marks) + two challenges (3 marks each). Always name the challenge first, then explain the impact.

2016 Q2(B) / 2014 Q2(B)Benefits & drawbacks of franchising for a start-up. (20)▼

Outline the benefits and drawbacks for a new business of choosing to operate as a franchise. (20 marks)

✏️ Benefits (for the franchisee)

Proven business idea: The franchisee is buying into a tested business model with a track record of success — significantly reducing the risk of failure compared to starting from scratch.

Existing customer base: The franchise brand already has customer loyalty and recognition. The new business owner benefits from instant demand without needing to build a brand from zero.

✏️ Drawbacks (for the franchisee)

Ongoing fees and costs: The franchisee must pay an upfront fee plus a percentage of profits or turnover to the franchisor. This is more expensive than starting an independent business.

Restricts innovation: The franchisee must follow the franchisor's rules on products, suppliers, décor and marketing. There is little freedom to innovate or personalise the business.

📌 Ch20 franchise = from the FRANCHISEE's perspective. This is the opposite of Ch18 franchise questions, which are from the franchisor's perspective. Be clear on which viewpoint the question is asking for.

🔥 HOT Advantages of a Private Limited Company

The 2026 workpack lists this as the number one must-know for Ch20. It was asked in 2015 Q2(A), 2022 Q2(A) (Ltd vs DAC), and 2024 Q7(B) (Sole Trader vs Ltd). With 2025 asking Illustrate four types (Partnership, Sole Trader, Franchise, PLC), a dedicated "advantages of a Ltd for a start-up" question is due again. Know all five advantages cold: limited liability, separate legal entity, continuity of existence, access to capital (1–149 shareholders), corporation tax at 12.5%.

Last standalone Ltd advantages Q: 2015 (11 years ago). Strong candidate.

🔥 HOT Franchise as a Start-Up (Franchisee)

Franchising for a start-up (as franchisee) is a 2026 must-know. Last asked as a full question in 2016 Q2(B) and 2014 Q2(B). The 2025 paper asked students to illustrate a franchise but not to evaluate benefits/drawbacks. A full benefits and drawbacks of franchising for a new business question is overdue. Remember: Ch20 franchise = from the franchisee's perspective (unlike Ch18 which is from the franchisor's perspective).

Last full franchise Q: 2016 (10 years ago). Due again.

⚡ WARM Indigenous Firms — Short Q

The 2026 workpack flags indigenous firms + challenges as a must-know for short questions. It appeared in 2023 Short Q1 and 2020 Short Q6. Know the definition precisely (Irish-owned, Irish-based, managed by Irish residents) and have two well-developed challenges ready: competition from MNCs, rising costs, labour shortages, lack of economies of scale.

Last asked: 2023 SQ1. Could reappear as a short Q in 2026.

⚡ WARM Privatisation vs Nationalisation

Privatisation/nationalisation is a 2026 must-know. It was asked in 2023 Q2(A) — distinguish + benefit/challenge. Before that: 2017 Q2(C), 2014 Q2(A), 2008 Q2(C). The cycle suggests it may not appear in 2026 given the 2023 appearance, but it could easily appear as a short question (like 2021 Short Q12 — outline two advantages of privatisation). Have both definitions + examples + at least two benefits/drawbacks ready.

Last long Q: 2023. Could return as a short Q.

📅 DUE Reasons to Change Ownership Structure

This was asked in 2023 Q2(B) and 2010 Q2(B). While the 2023 appearance makes a repeat less likely, the underlying content (limited liability, continuity, access to capital, tax) overlaps heavily with the "advantages of a Ltd" question. If they ask "Why would a sole trader become a Ltd?", you're answering the same material from a different angle.

Last asked: 2023. Content overlaps with Ltd advantages — know both angles.

🎯 Command Words in Ch20 Questions

Illustrate = State + Explain + Example. The 2025 Q2(A) used this — each type needed an explanation AND a named example. The example is worth 1–2 marks.

Outline = State + Explain. Give the keyword (2 marks) then develop it (3 marks).

Distinguish = Two definitions showing how concepts DIFFER. For privatisation vs nationalisation, show they are OPPOSITES — one sells, one buys.

Compare = Show similarities AND/OR differences under structured headings. The 2024 Q7(B) used this for Sole Trader vs Ltd.

⚠️ No ABQ in Chapter 20

Ch20 is in Unit 6. The ABQ technique (State → Explain → Quote from passage) does NOT apply to Units 6 and 7 (Chapters 19–26). Focus on clear definitions, examples, and structured answers.

🪤 The Franchise Viewpoint Trap

Ch20 franchise questions ask about franchising from the FRANCHISEE's perspective — the person buying into the franchise as a new business. Ch18 franchise questions ask from the FRANCHISOR's perspective — the original brand owner expanding.

Ch20 (Franchisee): Benefits = proven idea, existing customers, training. Drawbacks = fees, restricted innovation, territory limits.

Ch18 (Franchisor): Benefits = low capital, rapid expansion. Risks = loss of control, brand damage.

Read the question carefully to determine which viewpoint is required. Getting this wrong means writing a completely irrelevant answer.

📊 Sole Trader vs Ltd — The Key Comparison

This comparison comes up regularly (2024 Q7(B), 2010 Q2(B)). Structure your answer under clear headings:

Liability: Unlimited vs Limited
Legal Status: Not separate entity vs Separate legal entity
Finance: Own savings/loans vs 1–149 shareholders
Tax: Income tax 20/40% vs Corporation tax 12.5%
Continuity: Ends on death vs Continuity of existence

Each heading addresses BOTH types — this is what "compare" requires.

🔑 Keywords That Earn the Marks

unlimited liability limited liability separate legal entity continuity of existence corporation tax 12.5% 1–149 shareholders Articles of Association LP1 form deed of partnership one member one vote one share one vote Stock Exchange CRO privatisation nationalisation deregulation indigenous firm franchisor / franchisee proven business idea economies of scale