3.1.2 Understanding different business forms

    Cards (120)

    • 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