Decision making faster, sole trader only person responsible
Feeling of independence + control
Straightforward to set up. Few legal requirements
Profits made all belong to sole trader - can be Drawings
Disadvantages:
Owner has unlimited liability for debts of business. If it becomes bankrupt, owner's personal assets may be sold to pay trade payables.
Expansion limited - can only be achieved by owner ploughing back profits, or borrowing from lender e.g. bank
Owner usually has to work long hours and may be difficlt to take holidays. If owner should become ill, business could become slow or stop altogether.
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Partnership
Advantages:
Partners may be able to specialise in particular areas
Cheap and easy to set up
Possibility of increased capital
With more people running business, more cover for illness and holidays
Disadvantages:
Decisions may take longer - other partners may need to be consulted
May be disagreements between partners
Each partner liable in law for dealings and business debts of whole firm (unless is a Limited Liability Partnership (LLP) set up under the Limited Liability Partnerships Act 2000)
Retirement or death of one partner may adversely affect the running of the business.
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Limited Company
Advantages:
Shareholders have protection of 'Limited Liability' - if company failed, shareholders would only lose initial investment (or any promised investment). Unlike sole trader or partnership, cannot lose private posessions.
Limited Companies can raise larger amounts of money (capital). Unlike Sole traders (1 person) or partnerships (up to 20 people), companies have unlimited amount of shareholders raise funds from
Limited company - seperate legal identity owners, can continue to operate irrespective of changes in ownership.
Disadvantages:
Limited Companies subject to many legal requirements:
Formation-
Memorandum of association - details external dealings with the company
Articles of association - details internal regulation of the company
Both filed at Companies House - Cardiff - Registrar
Directors required to send the annual accounts to registrar for public inspection
Possibility that over a period of time ownership of business can change. therefore control can change - can be bad for the original owners
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