Business Structures

Question 1

What are 2 advantages of a Sole Trader?

Answer 1

• Easy to start and run.

- No registration or documentation is required

Question 2

What are 2 advantages of a Partnership?

Answer 2

• No registration is required to start a partnership
• Good way to share a business operation cost
• Expertise is shared

Question 3

What are 2 advantages of a Company?

Answer 3

• More credibility in the marketplace
• Easier to attract funds and investments
• Easier to sell the business or pass it on

Question 4

What are 2 disadvantages of a Sole-trader?

Answer 4

• Sole traders lack credibility in the marketplace
• Harder to attract loans and investments
• Harder to sell the business
• The business only lasts the lifetime of the sole trader

Question 5

What are 2 disadvantages of a Partnership?

Answer 5

• Partners may be liable for debts incurred by other partners
• Putting personal assets at risk
• Control is shared
• Possible partnership conflicts

Question 6

What are 2 disadvantages of a Company?

Answer 6

• Directors need to clearly understand their responsibilities
• Limited liability advantages are often eroded in practice by the need to provide personal guarantees to lenders or creditors
• Control is divided or shared

Question 7

What is unlimited liability?

Answer 7

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

Question 8

What is limited liability?

Answer 8

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