Comparisons Flashcards
(20 cards)
What is a sole trader?
A sole trader is an individual who owns and operates a business alone, with full control and unlimited liability.
What is a partnership?
A partnership is a business owned by two or more people who share profits, losses, and responsibilities.
What is a company?
A company is a separate legal entity from its owners, formed under company law, with limited liability for shareholders.
Who has control in a sole trader business?
The sole trader has complete control over the business.
Who controls a partnership?
Control is shared among partners according to the partnership agreement.
Who controls a company?
Control lies with the board of directors elected by shareholders.
What is the liability of a sole trader?
Unlimited liability - the owner is personally liable for all debts.
What is the liability of partners in a partnership?
Partners have unlimited liability, though limited partnerships exist.
What is the liability of shareholders in a company?
Shareholders have limited liability up to the amount unpaid on their shares.
How is a sole trader business taxed?
Income is taxed as personal income of the sole trader.
How is a partnership taxed?
Each partner pays tax on their share of profits.
How is a company taxed?
Companies pay corporate tax on profits; shareholders pay tax on dividends.
What is the legal status of a sole trader?
Not a separate legal entity.
What is the legal status of a partnership?
Generally not a separate legal entity (except LLPs).
What is the legal status of a company?
A separate legal entity from its owners.
How is a sole trader business formed?
No formal registration is needed beyond licensing.
How is a partnership formed?
By agreement between parties, which can be written or oral.
How is a company formed?
Incorporated under the Companies Act with registration and documents.
What are the regulatory requirements for a sole trader?
Minimal, mainly tax registration.
What are the regulatory requirements for a company?
Extensive – includes filings, accounts, audits, and AGMs.
