form of business

Question 1

What is limited liability

Answer 1

Company is responsible for it’s debts

Question 2

What is meant by unlimited liability

Answer 2

Debts not separate from owners finance

Question 3

What are the advantages and disadvantages to a sole trader

Answer 3

A sole trader is self employed and runs their own business
 ADV - keeps all profit 
In full control
No legal costs 
DISADV - risky 
Responsible for business debts 
Long hours

Question 4

What are the advantages and disadvantages to a patnership

Answer 4

Many contribute to capital
All have useful skills 
Responsibility is shared 
 DISADV - unlimited liability
Each partner liable for business debts
Require legal agreements

Question 5

What are the advantages and disadvantages of a private/public limited company

Answer 5

Shareholders have limited liability and are not personally responsible for debt
DISADV - rules for setting and running business
Difficult to raise finance

Question 6

Advantages of becoming a PLC

Answer 6

Large amount of capital raised - business can invest
Owners can make lots of money
Business can gain status

Question 7

Disadvantage of PLC

Answer 7

Original owners lose control
Shareholders expect dividends
Floating on stock exchange can be costly
Comply with wide range of regulatory and legal requirements