Introduction to Business- Types of business

Question 1

What is a sole trader?

Answer 1

A business owned by one person.

Question 2

What is a partnership?

Answer 2

A business owned by two or more people.

Question 3

What is a limited liability partnership?

Answer 3

Businesses that would usually operate as traditional partnerships but individual partners are not personally responsible for business debts and liabilities beyond what they invest.

Question 4

What is a private limited company (LTD)?

Answer 4

A company in which a number of shareholders (no more than 50) contribute funds to the company in return for shares. Shares can’t be sold on the stock exchange.

Question 5

What is a public limited company (PLC)?

Answer 5

Shares are sold to the public on the stock market, shareholders become part owners of the business and have a voice in how it operates.

Question 6

What is limited liability?

Answer 6

Investors cannot lose more than the amount they have paid into a business. It protects them from having to a pay a business’s debts in bankruptcy.

Question 7

What is unlimited liability?

Answer 7

The owner is personally and fully responsible for all losses and debts of the business, can lose personal belongings.

Question 8

Which factors affect the choice of legal structure for a business?

Answer 8

Control.
Limitation of liability.
Complexity of legal structure.
Flexibility and future needs.
Tax implications.