Business ownership: Practice Questions

Which type of business ownership is owned and controlled by a single individual who has full responsibility for the business?

What is the significance of limited liability for the shareholders of a private limited company (\(Ltd\))?

A large, multi-national company wants to expand its operations and requires significant capital investment. The current owners are concerned about personal liability and wish to raise finance by selling shares to the general public on a stock exchange.

Which type of business ownership would be most suitable for this company to achieve its objectives?

State one key difference between a sole trader and a private limited company (Ltd) regarding liability.

Explain why a partnership might choose to incorporate as a private limited company (Ltd), even if it means losing total control over the business and facing stricter financial reporting requirements.

Sarah is planning to open a new boutique hair salon. She is currently deciding whether to operate as a sole trader or to enter into a partnership with her sister.

(a) State one feature of a sole trader business.
(b) Explain two advantages for Sarah of choosing a partnership instead of being a sole trader.

Sarah is planning to start a new business selling handmade jewelry online. She is debating whether to operate as a sole trader or to form a partnership with her friend, Emily, who is a skilled graphic designer.

a) State one advantage of Sarah operating as a sole trader.
b) Explain two benefits of Sarah forming a partnership with Emily rather than working alone.
c) Explain why the concept of unlimited liability might be a significant risk for Sarah in either of these business structures.