Business Structures

Question 1

What are 2 advantages of a company ?

Answer 1

More credibility in the marketplace

Easier to attract funds and investment (investors can become shareholders)

Question 2

What are 2 advantages of a partnership ?

Answer 2

Partners can share skills and expertise

Partners can share the risk and responsibility of the business

Question 3

What are 2 advantages of a sole trader ?

Answer 3

All profits are the property of the owner

The owner can often work his or her own hours

Question 4

What are 2 disadvantages of a company ?

Answer 4

Directors need to clearly understand their responsibilities
Limited liability advantages are often eroded in practice by the need to provide personal guarantees to lenders or creditors

Question 5

What are 2 disadvantages of a partnership ?

Answer 5

The partnership is not a separate legal entity from the partners themselves
Partners may be liable for debts incurred by other partners

Question 6

What are 2 disadvantages of a sole trader ?

Answer 6

The owner takes all of the responsibility for the business

Harder to attract loans and investment

Question 7

What is he definition of unlimited liability ?

Answer 7

If the business fails the personal assets of the owner can be used to pay business debts

Question 8

What is the definition of limited liability ?

Answer 8

If the business fails the personal assets of the owner cannot be used to pay business debts.