business structures

Question 1

What are two advantages of a company

Answer 1

• More credibility in marketplace
• Easier to attract funds and investors
• Easier to sell business
• The shareholders liability is limited to their share of the company

Question 2

What are two advantages of a partnership

Answer 2

• No registration is required to start a partnership.
• Expertise is shared
• Is an effective way to share business costs

Question 3

What are two advantages of a Sole trader

Answer 3

• Easy to start and run
• No registration or formal documentation is required
• Can work your own hours
• All profits are property of the owner

Question 4

What are two 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
• Control is divided or shared

Question 5

What are two disadvantages of a partnership

Answer 5

• Partners may be liable for debts incurred by other partners
• Personal assets are at risks
• Control is shared
• Possible partnership conflict
• Complications if partner dies or leaves

Question 6

What are two disadvantages of a sole trader

Answer 6

• Unlimited liability putting their assets at risk.
• Harder to attract loans and investments
• Harder to sell the business
• Lack of credibility in the market place.
• The owner bears all losses

Question 7

What is the 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 cant be used to pay business debts.