Topic 1 Quiz 3 Sole Trader, Partnership, Ltd and PLC

Give two advantages of being a Private Limited company (Ltd)

• Control– tend to have fewer shareholders that public limited companies, therefore shareholders have more control

• Sharing of profits dependent on share in business

• Divorce of ownership and control – shareholders are owners of the company by directors and managers make the day to day decisions, this can cause difficulties

• Raising capital – no limit to number of members able to raise capital i.e. limited liability

Give two disadvantages of a Partnership

• Limited liability

• Conflict between partners

• Loss of autonomy – i.e. all decisions have to be discussed and agreements reached slowing down decision making process

• Raising capital easier

Two advantages of trading as a Public Limited Company (PLC) are

• Set up costs – set up is time consuming and costly due to official procedures to ensure that it complies fully with UK company law

• Limit on capital – as not able to sell shares publicly limited capital for expansion and growth

• Limited liability

• Specialisation – generally large companies with large numbers of directors, specialisation and division of labour should help companies become more efficient and productive

Two disadvantages of being a Sole Trader are

• Long hours

• All profits are kept

• Lack of capital sole traders find It difficult to find the money to start their business and banks often reluctant to lend

• Loss of autonomy – i.e. all decisions have to be discussed and agreements reached slowing down decision making process

Which one of the following is a disadvantage of trading as a Private Limited Comany (Ltd)

• Raising capital – no limit to number of members able to raise capital i.e. limited liability

• Limited liability

• Sharing of profits dependent on share in business

• Threat of takeover – shares for sale on stock market, other firms may attempt to buy these and therefore gain control of the company

Which one of the following is an advantage of being a Sole Trader

• Unlimited liability

• Raising capital easier

• Continuity – legal existence is separate from that of its owner, i.e. not affected if one particular shareholder leaves, i.e. everlasting life and can only be ended through an official wind-up or liquidation

• Better control (quicker decisions)

Which two of the following are advantages of being a Sole Trader or trading as a Partnership

• Specialisation e.g. someone covers accounts while someone else covers marketing and sales

• Financial privacy financial affairs do not have to be published and therefore business dealing can be kept private

• Low start-up costs

• Unlimited liability

Which two of the following are disadvantages of trading as a Private Limited Company or a Public Limited Company

• Set up costs – time consuming and costly to set up due to official procedures to complete to ensure business complies fully with UK company law

• Threat of takeover – shares for sale on stock market, other firms may attempt to buy these and therefore gain control of the company

• Lack of privacy – need to make certain aspects of their affairs available to the public

• Unlimited liability

Which one of the following is the odd one out

• Shared work load i.e. lower workload

• Financial privacy financial affairs do not have to be published and therefore business dealing can be kept private

• All profits are kept

• Specialisation e.g. someone covers accounts while someone else covers marketing and sales

Which one of the following is the odd one out ?

• Limit on capital – as not able to sell shares publicly limited capital for expansion and growth

• Threat of takeover – shares for sale on stock market, other firms may attempt to buy these and therefore gain control of the company

• Set up costs – set up is time consuming and costly due to official procedures to ensure that it complies fully with UK company law

• Divorce of ownership and control – shareholders are owners of the company by directors and managers make the day to day decisions, this can cause difficulties