1. Forms of business ownership

Question 1

State three difference forms of business ownership.

Answer 1

1. Sole proprietorship,
2. limited liability partnership and
3. private limited company.

Question 2

Different between sole proprietorship and private limited company i_n term of ownership_.

Answer 2

Sole proprietorship - Owned by one person.

Private limited company - Owned by 50 or less shareholders

Question 3

Different between sole proprietorship and private limited company in term of access of funds

Answer 3

Sole proprietorship

• It less likely for banks and other lenders to lend money to the SP due to lack of personal assets that can be serve as collaterals
• Access of funds is usually limited to the personal funds of the owners.

Private limited company

• It is more likely for the banks and other lenders to lend money to the PLC as there are more business assets of high value that can be serve as collaterals.
• Business can raise funds by issuing more shares.

Question 4

Different between sole proprietorship and private limited company in term of risk (extend of liability)

Answer 4

Sole proprietorship

• Sole owner is obliged to pay the business liabilities using his or her personal assets if business assets are insufficient to settle the debts (unlimited liabilities).

Private limited company

• Shareholders are not obliged to pay the business liabilities using their personal assets if business assets are insufficient to settle the debts.
• Maximum loss of the shareholder is their investment in the business if the business fails.

Question 5

Different between sole proprietorship and private limited company in term of level of control

Answer 5

Sole proprietorship

• Owner usually runs the business by himself or herself and has _absolute contro_l over the business.

Private limited company

• Shareholders have no control over the running of the business unless they are part of the management team.

Question 6

Different between sole proprietorship and private limited company in term of transferability of ownership

Answer 6

Sole proprietorship - It is easy to transfer ownership by notifying the corporate regulatory authority.

Private limited company - Shareholders simply sell away their shares

Question 7

Different between sole proprietorship and private limited company in term of formalities and procedures.

Answer 7

Sole proprietorship

• There is minimal administrative duties to adhere to.

Private limited company

• PLC must comply with statutory requirements and file annual financial reports.