Sole Traders & Partnerships Flashcards

All 10 cards in this deck

What is a partnership?

A business owned by two or more people who share the profits and usually have unlimited liability; the terms may be set out in a deed of partnership.

What is a sole trader?

A business owned and run by one person, who may employ others but has unlimited liability for all business debts.

What is unlimited liability?

The owner or owners are personally responsible for all debts of the business, no matter what the value.

Give one advantage of being a sole trader.

Any one of: quick and easy to set up; low set-up costs; the owner keeps all the profit and makes all decisions.

Give one disadvantage of being a sole trader.

Any one of: unlimited liability, so personal possessions are at risk; it is harder to raise finance; the owner carries all the workload and decisions alone.

Give one advantage of starting a business as a partnership.

Any one of: partners bring extra skills and experience; risk, workload and decisions are shared; more capital can be put in than by one owner.

Give one disadvantage of starting a business as a partnership.

Any one of: there may be disagreements between partners, making decisions difficult; decisions made by one partner affect all partners; all partners are liable for the debts.

What is a deed of partnership?

A written agreement between the partners setting out how the partnership will run, such as each partner's role, how much capital each puts in and how profits and losses are shared.

Give one disadvantage of being a sole trader to do with continuity.

If the owner dies or is too ill to work, the business may stop, because there is no one else to run it.

Give one advantage that sole traders and partnerships have over limited companies to do with financial information.

Their financial information is private: they do not have to make their accounts available to the public, so competitors cannot see how they are performing.