1.4a The Options For Start-up Business

Question 1

What is limited liability and unlimited liability ?

Answer 1

• limited liability : exists when an entrepreneur’s risks is limited to the amount they have invested in. Personal assets can’t be used ( incorporated )

Unlimited Limburg : exists when an entrepreneur risks their own assets ( unincorporated)

Question 2

Who is a sole trader ?

Answer 2

One person sets up a business on their own ( unincorporated business )

Question 3

What is partnership in a business ?

Answer 3

Two or more people join together to set up and run a business

Question 4

What is a private limited company ?

Answer 4

An incorporated business that is owned by shareholders

Question 5

Advantages and disadvantages of being a sole trader

Answer 5

• makes all decision by themselves therefore quick
• quick and easy to set up
• keeps all profits
• financial information kept private
• unlimited liability
• difficult to raise money to grow the business
• pressure
• difficult to run if owner is ill or takes time off

Question 6

Advantages and disadvantages of partnership

Answer 6

• Wider expertise and can share ideas
• risk is shared
• easier to raunze finance
• financial information kept private
• decision made my one partner acts all partners
• partner leaves , business no longer exits
• profits are shared
• disagreement between partner

Question 7

Advantages and disadvantages of private limited company

Answer 7

• limited liability
• appears to be bigger or more long-established business
• can be easier to raise finance
• business continue to trade even if shareholders change
• more complex to set up
• disagreements between shareholders
• business financial information published
• more requirements to report information to organisations