1.4.1: types of business ownership

Question 1

pros of partnerships

Answer 1

• shared risk/decision making
• wider expertise
• allows family ownership
• easier to raise finance/establish
• easy to set up
• accounts can remain private (excl. LLPs)

Question 2

cons of partnerships

Answer 2

• shared profits
• if 1 leaves, partnership no longer exists
• unincorporated & limited liability

Question 3

unlimited liability

Answer 3

owner is legally responsible for any debts of the business; potential for the owner to lose personal assets to pay off debts.

Question 4

limited liability

Answer 4

business owner is only responsible for business debts up to the value of their financial investment.

Question 5

cons of plcs

Answer 5

• more complex to set up
• shareholders may disagree
• must report financial information to HMRC; available for public inspection

Question 6

pros of plcs

Answer 6

• limited liability
• continues to trade even if shareholders change
• easier to raise finance/establish business

Question 7

pros of being a sole trader

Answer 7

• make all the decisions
• keep all profits
• accounts kept private
• quick & easy to set up (just tell the HMRC)

Question 8

cons of being a sole trader

Answer 8

• lots of pressure
• nobody can cover if you take holidays
• harder to raise capital & grow
• unincorporated
• unlimited liability

Question 9

sole trader

Answer 9

an unincorporated business owned by one person