1.1 Types of Business Organisations

Question 1

What is sole trader?

Answer 1

An individual who owns his or her own business.

Question 2

What is unlimited liability

Answer 2

Full responsibility for the debt of the business.

Question 3

What is bankruptcy?

Answer 3

When someone is judged be unable to pay their liabilities by a court of law.

Question 4

What is a partnership?

Answer 4

Partnership is a business that has 2 to 20 owners.

Question 5

What is deed of partnership?

Answer 5

A formal agreement begin a partnership.

Question 6

What is the limited partnership

Answer 6

A type partnership where partners are responsible for the partnership’s debts only up to the amount the originally invested.

Question 7

What are the 5 advantages and 5 disadvantages of a sole trader?

Answer 7

Ad
- Business is easy to set up -
so trader keeps all profit sole trader
- has complete control easier to make decisions
- accounts do not have to be published
Dis:
- Sole trader may lack capital and find it more difficult to raise.
- sorted as personally liable for
- all so trader may lack appropriate skills making all decisions can be stressful
- no continuity
- Unlimited liability

Question 8

What are the seven advantages and 6 disadvantages of a partnership?

Answer 8

AD:
- More capital or equity can be raised.
- Losses can be shared between partners,
- More skills and expertise to the business.
- Responsibility and management can be shared between the partners.
- partnerships are ideal organisations for professional practices such
- Profits are taxed as personal income.
DIS:
-Unlimited liability.
- partnership is dissolved on the death of a partner.
- diifficult to liquidate or transfer partnerships