comparsion of structures Flashcards
(20 cards)
Define a sole trader.
A sole trader is an individual who owns and runs a business alone, bearing full responsibility and unlimited liability.
Define a partnership.
A partnership is a business owned by two or more individuals who share profits, liabilities, and management duties.
Define a company.
A company is a separate legal entity formed under law, offering limited liability to its shareholders.
What is the legal status of a sole trader?
A sole trader is not a separate legal entity from its owner.
What is the legal status of a partnership?
A partnership is not a separate legal entity, except for limited liability partnerships (LLPs).
What is the legal status of a company?
A company is a separate legal entity from its shareholders and directors.
Who owns a sole trader business?
The individual owner.
Who owns a partnership?
The partners collectively.
Who owns a company?
The shareholders.
Who manages a sole trader business?
The sole trader manages all aspects of the business.
Who manages a partnership?
The partners manage the business together, based on their agreement.
Who manages a company?
The board of directors, appointed by the shareholders.
What is the liability of a sole trader?
Unlimited liability; the owner’s personal assets are at risk.
What is the liability of partners in a partnership?
Unlimited liability, unless it’s a limited partnership or LLP.
What is the liability of shareholders in a company?
Limited liability; only liable up to the amount unpaid on their shares.
How is a sole trader taxed?
Taxed on business profits as personal income.
How is a partnership taxed?
Partners are taxed individually on their share of profits.
How is a company taxed?
Companies pay corporation tax; shareholders may also pay tax on dividends.
What are the regulatory requirements for sole traders?
Minimal – mainly tax and local business registrations.
What are the regulatory requirements for companies?
Extensive – includes incorporation, annual filings, and compliance with company law.
