Business Structures

Question 1

What is 2 Advantages of a Sole Trader

Answer 1

• Easy to start and run

- No registration or formal documentation required

Question 2

What is 2 Advantages of a Partnership?

Answer 2

• No registration is required to start a partnership
• Can be an effective way to share business operation costs(e.g. several professional people operate out of a joint office)

Question 3

What is 2 Advantages of a Company?

Answer 3

• Easier to attract funds and Investment(Investors can become shareholders)
• Easier to sell the business or pass it on to others as it is a separate entity

Question 4

What is 2 Disadvantages of a Sole Trader?

Answer 4

• Owners have unlimited liability for all business taxes and debts, putting their personal assets at risk
• Sole Traders can lack credibility in the marketplace

Question 5

What is 2 Disadvantages of a Partnership?

Answer 5

• Partners may be liable for debts incurred by other partners
• Putting personal assets at risks

Question 6

What is 2 Disadvantages of a Company?

Answer 6

• 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 7

What is Unlimited Liability?

Answer 7

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

Question 8

What is Limited Liability?

Answer 8

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