3.1.2 Understanding different business forms

• A sole trader is owned and run by one person
• Match the business form with its key characteristic:

  Sole Trader ↔️ Simple to set up

  Partnership ↔️ Shared responsibilities

  Limited Company ↔️ Separate legal entity
• A sole trader keeps all the profits
• Partnerships have the potential for disagreements
• A sole proprietor is personally liable for all business debts
• Match the characteristic of a partnership with its advantage:

  Multiple owners ↔️ More capital can be raised

  Shared workload ↔️ Easier to manage diverse tasks

  Pooled expertise ↔️ Better decision-making
• What is a key disadvantage of partnerships regarding liability?

  Unlimited liability
• What is the primary purpose of business forms?

  Legal structure
• What is a significant advantage of a limited company compared to a sole trader?

  Limited liability
• In a sole proprietorship, the owner is personally liable for business debts
• A partnership is a business owned and run by two or more individuals
• How does shared liability in a partnership benefit the owners?

  Risk is distributed
• What happens to personal assets if a partnership incurs significant debt under unlimited liability?

  Assets can be seized
• What is a key feature of LLC management that enhances its flexibility?

  Appointed managers
• What are business forms defined as?

  Legal structures of businesses
• A sole trader is personally liable for business debts.


  True
• Match the characteristic of a sole proprietorship with its advantage:

  Single owner ↔️ Keeps all profits

  Simple to set up ↔️ Minimal legal requirements

  Flexible decision-making ↔️ Full control over business

  Minimal regulations ↔️ Fewer compliance obligations
• Sole proprietors often face difficulty in raising capital
• What is the defining characteristic of a partnership?

  Two or more owners
• Pooled expertise in a partnership can lead to better decision-making.


  True
• Partnerships can raise capital as easily as limited companies.

  False
• LLC members might need to navigate various tax forms depending on their tax treatment.

  True
• PLCs are well-suited for large-scale enterprises because they can raise significant capital.

  True
• Partnerships have unlimited liability for all partners.

  True
• A sole proprietorship has minimal legal and administrative requirements.


  True
• A sole trader has limited liability for business debts.

  False
• Sole proprietorships have fewer compliance obligations than limited companies.


  True
• The lack of continuity is a disadvantage of sole proprietorships.


  True
• In a partnership, all partners have unlimited liability
• Disagreements in partnerships can disrupt the business due to the challenge of achieving unanimity
• Match the business form with its characteristic:

  Sole Trader ↔️ Unlimited liability

  Partnership ↔️ Shared responsibilities

  Limited Company ↔️ Separate legal entity
• A sole proprietorship requires minimal legal requirements to set up.

  True
• A sole proprietorship continues indefinitely after the owner's death or retirement.

  False
• Match the partnership characteristic with its advantage:

  Multiple owners ↔️ More capital can be raised

  Shared workload ↔️ Easier to manage diverse tasks

  Pooled expertise ↔️ Broader skill set and knowledge
• In a partnership, unlimited liability means partners are personally liable for business debts
• An LLC combines the limited liability of a corporation with the pass-through taxation of a partnership
• Setting up an LLC is simpler and cheaper than forming a sole proprietorship.

  False
• Common business forms include sole trader, partnership, and limited company
• In a partnership, resources and skills are shared
• Sole proprietorships are suitable for small businesses due to their minimal regulations.


  True