FORMS OF BUSINESS 1

Question 1

WHAT DOES THE LEGAL FORM OF THE BUSINESS OFTEN DEPEND ON?

Answer 1

The size of the business

Question 2

WHAT HAPPENS WHEN A BUSINESS BECOMES A LIMITED COMPANY?

Answer 2

It will become a separate legal entity when it goes through the process of incorporation

Question 3

WHAT IS THE BUSINESS FORM OF A SOLE TRADER (OWNED BY SELF EMPLOYED INDIVIDUALS)?

Answer 3

1. East to start up - no registration needed
2. Requires a wide range of skills and flexibility
3. The owner can be their own boss but the hours are likely to be long
4. The owner keeps all profits
5. Unlimited liability

Question 4

WHAT ARE THE BUSINESS FORMS OF PARTNERSHIPS (A BUSINESS OWNED BY 2 OR MORE INDIVIDUALS)?

Answer 4

1. Joint ownership of running a business
2. A contract of relationship will be set up through a deed of partnership
3. These are common in professions such as solicitors
4. Similar issues as faced by sole traders but with greater shared responsibility, risk and reward

Question 5

WHAT ARE THE BUSINESS FORMS OF A PRIVATE LIMITED COMPANY (OWNED BY SHAREHOLDERS AND ARE A SEPARATE LEGAL ENTITY)?

Answer 5

1. Must go through the process of incorporation
2. Limited liability
3. Has a higher status than a sole trader
4. Will have wider access to capital (all goods that are used for producing goods and services ie physical assets or money invested into the business to purchase assets.