FORMS OF BUSINESS

Question 1

define limited liability

Answer 1

Risk limited to the size of your investment
- No threat to personal possessions
- shareholders only lose the value of their investment

• incorporated

Question 2

define unlimited liability
characteristics

Answer 2

The risk extends beyond initial investment to a whole debt of the business
- Can lead to bankruptcy

• unincorporated = the owner is the business

Question 3

what is a sole trader?
what type of liability do they have?
characteristics?

Answer 3

 Owned by one owner
 Typically small businesses
 Easy to startup
 The owner keeps all profits
 Unlimited liability

Question 4

advantages of a sole trader

Answer 4

+ Easy to set up
+ All profits kept
+ No information made public
+ Personal service

Question 5

disadvantages of a sole trader

Answer 5

• Unlimited liability
• Difficult to raise money
• Lack of skills in certain areas

Question 6

what is a partnership?

Answer 6

 Between 2-20 partners
 Similar issues by the sole trader but greater shared responsibilities, rewards and risk
 Unlimited liability

Question 7

advantages of a partnership

Answer 7

+ Easy to set up
+ Easier to raise capital than a sole trader
+ Partners contribute with a range of skills
+ Shared problems

Question 8

disadvantages of a partnership

Answer 8

• Unlimited liability
• Disagreements; control, sharing profits
  etc.

Question 9

finish off

Answer 9

d