legal structures

Question 1

3 advantages of being a sole trader

Answer 1

• quick and easy to set up
• complete control over decision making
• minimal form filling / paperwork

Question 2

4 disadvantages of being a sole trader

Answer 2

• unlimited liability
• harder to raise finance
• pay more tax than a company
• the business suffers if the owner is ill

Question 3

4 advantages of having a partnership

Answer 3

• can limit the effects of unlimited liability through a partnership agreement (e.g. some partners may not be legally liable for the depts)
• easier to raise finance
• paperwork can be shared
• partners have full control of the business

Question 4

Disadvantages of partnerships

Answer 4

• unlimited liability
• slower decision making
• expenses from creating and sticking to partnership agreement

Question 5

3 Advantages of being a private limited company (LTD)

Answer 5

• limited liability
• easier to raise finance (sell shares/loans)
• pays less tax than a sole trader

Question 6

2 disadvantages of being a private limited company

Answer 6

• some financial information has to be made available publicly
• unlimited liability expenses (annual general meeting and having accounts checked by an accountant)

Question 7

Advantages of being a public limited company

Answer 7

• unlimited liability
• can advertise shares to the public to raise money
• they’re more popular, attracting investment

Question 8

3 disadvantages of being a public limited company

Answer 8

• can’t control who buys and sells its shares
• increase in costs of meeting legal obligations (more detailed accounts being made available to the public and shareholders)
• outside investors can disagree and change the way the business is run