advantages and disadvantages of different ownerships

Question 1

Advantages of Sole Traders

Answer 1

• The sole trader makes all of the decisions by themselves, which is quick and does not lead to disagreements.
• Quick and easy to set up.
• The sole trader keeps all of the profits.
• Financial information is kept private.

Question 2

Disadvantages of sole traders

Answer 2

• The sole trader has unlimited liability.
• It may be difficult to raise enough money to establish or grow the business.
• Puts a lot of pressure on just one person.
• Can be difficult to run if the owner is ill or takes time off.

Question 3

Advantages of partnerships

Answer 3

• The business owners may have wider expertise and can share ideas and decision-making.
• The risk is shared.
• Can be easier to raise finance to establish or grow the business.
• The business’s financial information is kept private.

Question 4

disadvantages of partnerships?

Answer 4

• Decisions made by one partner can affect all partners.
• If a partner leaves, the business no longer exists.
• The profits are shared.
• There may be disagreements between partners.

Question 5

advantages of private limited companies

Answer 5

• The owners have limited liability.
• The term ‘Ltd’ after the business’s name may make it appear to be a bigger or more long-established business.
• Can be easier to raise finance to establish or grow the business.
• The business continues to trade even if shareholders change.

Question 6

disadvantages of private limited companies

Answer 6

• More complex to set up than a sole trader or partnership.
• There may be disagreements between shareholders.
• The business’s financial information is published.
• More requirements to report information to organisations such as HMRC and Companies
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