Business Structures Flashcards
1
Q
What are two advantages of a company?
A
- Easier to attract funds and investments.
- The shareholders liability for losses is limited to their share of ownership of the company.
2
Q
A partnership?
A
- No registration is required to start a partnership.
- Can be effective way to share business operation costs.
3
Q
A sole trader?
A
- easy to start and run
- No registration or formal documentation required.
4
Q
What are two disadvantages of a company?
A
- Limited liability advantages are often eroded in practice by the need to provide personal guarantees to lenders and creditors.
- Directors need to clearly understand their responsibilities.
5
Q
A partnership?
A
- Partners may be liable for debts for incurred by other partners.
- Possible partnership conflicts.
6
Q
A sole trader?
A
- Owners have unlimited liability for all taxes and debts.
- Harder to attract loans and investments.
7
Q
What is the definition of unlimited liability?
A
If the business fails the personal assets of the owner can be used to pay business debts.
8
Q
What is the definition of limited liability?
A
If the business fails the personal assets of the owner cannot be used to pay business debts.
