Choosing The Appropriate Legal Structure

Question 1

What is a sole trader?

Answer 1

Someone who runs and has complete responsibility for the business. (Unlimited liability)

Question 2

What is a partnership?

Answer 2

Where 2 or more individuals share profits and liabilities of a business (unlimited liability)

Question 3

What is a private limited company (ltd)?

Answer 3

Small private business where shares are not sold publicly. (Limited liability)

Question 4

Advantages of a sole trader?

Answer 4

• keep all profits

- work own hours

Question 5

Disadvantages of a sole trader?

Answer 5

• unlimited liability

- no sick pay

Question 6

Advantages of a partnership?

Answer 6

• more ideas

- more capital

Question 7

Disadvantages of a partnership?

Answer 7

• shared profits

- unlimited liability

Question 8

Advantages of a private limited company?

Answer 8

• limited liability

- privacy from competition

Question 9

Disadvantages of a private limited company?

Answer 9

• conflicts between shareholders

- greater setup costs

Question 10

What is unlimited liability?

Answer 10

Responsible for all business debts and liable

Question 11

What is limited liability?

Answer 11

Where shareholders are only responsible for debts based on the value of their shares