1b: Forms of Business Ownership

Question 1

Ownership (SP)

Answer 1

It is owned by one person who contributes capital to set up the SP.

Question 2

Access to Funds (SP)

Answer 2

It is less likely for banks and other lenders to lend money to the SP due to the lack of personal assets that can serve as collaterals. Hence, access to funds is usually limited to the personal funds of the owner.

Question 3

Extent/Risk of Liability (SP)

Answer 3

When the SP incurs debts and losses, the sole owner is obliged to pay them using their personal assets.

Question 4

Level of Control (SP)

Answer 4

The only owner usually runs the business by themself and has absolute control over it. The only owner may hire professionals to help them.

Question 5

Lifespan (SP)

Answer 5

The SP exists as long as the owner is alive and desires to continue operation.

Question 6

Transferability of Ownership (SP)

Answer 6

The sole owner can easily update the particulars of the new owner to notify the corporate regulatory authority of the transfer of ownership.

Question 7

Formalities and Procedures (SP)

Answer 7

The SP has minimal administrative duties to adhere to.

Question 8

Ownership (LLP)

Answer 8

It is owned by two or more partners where each partner contributes capital to set up the LLP.

Question 9

Access to Funds (LLP)

Answer 9

It is more likely for banks and other lenders to lend money to the LLP as there are more sources of personal assets from partners and business assets to serve as collaterals. Alternatively, the LLP may get more persons to join as partners and contribute capital.

Question 10

Extent/Risk of Liability (LLP)

Answer 10

When the LLP incurs debts and losses, the partners are not personally liable for them. However, when the LLP incurs debts and losses due to the wrongful actions of one of the partners, only that partner is personally liable for them while other partners are not affected.

Question 11

Level of Control (LLP)

Answer 11

Usually, control is over the business is shared among the partners with at least one partner heavily involved in running the business. The partners may hire professionals to help them.

Question 12

Lifespan (LLP)

Answer 12

The LLP exists forever until wound up or struck off.

Question 13

Transferability of Ownership (LLP)

Answer 13

All partners need to agree to the addition of withdrawal of partner(s) before the corporate regulatory authority will acknowledge the transfer of ownership.

Question 14

Formalities and Procedures (LLP)

Answer 14

The LLP has few regulatory duties to comply with. However, one of the partners needs to submit an annual declaration stating whether it is able to pay its debts during the normal course of business.

Question 15

Ownership (PLC)

Answer 15

It is owned by 50 or less shareholders where each shareholder buys shares and contributes capital.

Question 16

Access to Funds (PLC)

Answer 16

It is more likely for banks and other lenders to lend money to the PLC as there are more business assets of high value to serve as collaterals. Alternatively, the company may issue more shares to raise funds.

Question 17

Extent/Risk of Liability (PLC)

Answer 17

When the company incurs debts and losses, shareholders are not obliged to pay them using their personal assets and may not receive dividends. In the worst-case scenario, they will only need to forfeit their investments.

Question 18

Level of Control (PLC)

Answer 18

The shareholders have no control over the running of the business, unless they are part of the management team. The company hires professionals to manage the business on behalf of the shareholders.

Question 19

Lifespan (PLC)

Answer 19

The company exists forever until wound up or struck off.

Question 20

Transferability of Ownership (PLC)

Answer 20

Shareholders can pay a stamp duty to the tax authority to give their shares to another person or organisation.

Question 21

Formalities and Procedures (PLC)

Answer 21

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