Business Structures

Question 1

What is 2 advantages of a Sole trader

Answer 1

• Easy to run and to start

- No registration or formal documentation is required

Question 2

What is 2 advantages of a partnership

Answer 2

• Expertise is shared
• Can be an effective way to share business operation costs (e.g several professional people operate out of a joint office)

Question 3

What is 2 advantages of a company

Answer 3

• More credibility in the market place

- Easier to attract funds and investments

Question 4

What is 2 disadvantages of a sole trader?

Answer 4

• Owners have unlimited liability for all business taxes and debts, putting their personal assets at risk
• Sole traders can lack credibility in the marketplace

Question 5

What is 2 disadvantages of a Partnership

Answer 5

• Partners may be liable for debts incurred by other partners
• Putting personal assets at risk

Question 6

What is 2 disadvantages of a Company

Answer 6

• Control is divided or shared

- Directors need to clearly understand their responsibilities

Question 7

What is unlimited liability

Answer 7

If the business fails the personal assets of the owner can be used to repay business debts

Question 8

What is limited liability

Answer 8

If the business fails the personal assets of the owner cannot be used to repay business debts