DP PREP: business entities

Which statement does not apply to sole traders?

• It is the most common form of ownership

• There can be more than one employer

• A business that is owned by one person

• There may be more than one employee

A sole trader is a person who

• Forms a business with another single person

• Sets up the safest form of business organisation

• Is not legally liable for any debts of the business

• Has exclusive responsibility for the running of the business

In comparison to other forms of businesses, sole proprietors face the problem of

• Continuity

• Administration and set-up procedures

• Having to arrange specialisation and division of labour on a large scale

• Privacy of account

Disadvantages of sole traders do not include

• Constraint of lack of time and specialisation

• A reliance on the efforts and liability of just one person

• The demands of having to be multi-skilled

• Autonomy in decision-making

Advantages of sole traders do not include

• A high degree of condentiality in administration

• Flexibility and freedom in decision-making

• Profits not having to be shared with others

• The various sources of finance available

Which of the following is not a necessary condition for an ordinary partnership?

• Signing the contents of a partnership deed

• Have between 2 to 20 partners

• Have at least one partner with unlimited liability

• Shares cannot be issued by the business

Which of the following is least likely to be a disadvantage of a partnership?

• Managing conflicts and disagreements

• Having to share profits

• Dealing with different sources of finance

• Less control of business activities

Which document is issued to a limited liability company before it can start trading?

• Articles of Association

• Certificate of Incorporation

• Deed of Partnership

• Memorandum of Association

Which of the statements is false?

• LTDs cannot sell shares on a stock exchange

• Second-hand shares of PLCs can be traded on a stock exchange

• Public limited companies operate in the private sector

• BOD of a private limited company solely own the business

Which of the statements about the shareholders is correct?

• An advantage for shareholders is having limited liability

• Shareholders have equal voting rights

• They own and control private and public limited companies

• They are always paid dividends for investing in the company