Forms Of Ownership For A Business

Question 1

What are the three main forms of ownership for a business

Answer 1

Sole proprietorship where there’s only one owner

partnership where there is two people or owners of the business

Close corporation where there is one to 10 people managing the business

Question 2

Name two advantages of a sole proprietorship

Answer 2

Advantages
owner can make quick decisions on his own

few legal requirements

owner
takes all the profits

Question 3

Name two disadvantages of a sole proprietorship

Answer 3

Owner has unlimited liability for debt

limited ability to raise capital

owner might lack certain business skills

Question 4

Name two advantages of a partnership

Answer 4

Business has greater financial strength

it combines managerial skills of partners

Formalities for formation and the solution becomes simple and inexpensive

Question 5

Name two disadvantages of a partnership

Answer 5

Urgent business decisions cannot be made quickly

owners have unlimited liability for debt

Continuity of partnership is uncertain because when a partner retires or dies the partnership agreement comes to an end

Question 6

Name two advantages of a closed corporation

Answer 6

The business can continue even after a member retires or dies

the business is a legal person and members are not liable personally for the debt of the business

It is simpler and less expensive to establish than private or public companies

Question 7

Name two disadvantages of a closed corporation

Answer 7

Urgent businesses decisions cannot be made quickly

there are more legal requirements compared to other forms of ownership

members are limited to 10 so this can hamper the ability to raise capital