Business Structures Flashcards

1
Q

What are 2 advantages of a Sole Trader?

A
  1. Easy to start and run.

2. No registration or formal documentation is required.

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2
Q

What are 2 disadvantages of a Sole Trader?

A
  1. Owners have unlimited liability for all business taxes and debts, putting personal assets at risk.
  2. Sole Traders can lack credibility in the marketplace.
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3
Q

What are 2 advantages of a Partnership?

A
  1. No registration is required to start a partnership.

2. Expertise is shared.

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4
Q

What are 2 disadvantages of a Partnership?

A
  1. Partners may be liable for debts incurred by other partners.
  2. Control is shared.
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5
Q

What are 2 advantages of a Company?

A
  1. More credibility in the marketplace.

2. Easier to attract funds and investments.

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6
Q

What are 2 disadvantages of a Company?

A
  1. Directors need to clearly understand their responsibilities.
  2. Limited liability advantages are often eroded in practice by the need to provide personal guarantees to lenders or creditors.
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7
Q

What is the definition of unlimited liability?

A

If the business fails, the personal assets of the owner can be used to pay business debts.

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8
Q

What is the definition of limited liability?

A

If the business fails the personal assets of the owner cannot be used to pay business debts.

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