Section 2 of 6
| Advantages | Disadvantages |
|---|---|
| Simple to set up — minimal legal formalities | Unlimited liability — personal assets at risk |
| Owner retains 100% of profit | Limited capital — restricted to own funds or borrowing |
| Complete control over all decisions | Heavy workload — all responsibilities fall on one person |
| Privacy — accounts not publicly disclosed | Business ceases if owner is ill or dies |
| Quick decision-making | Difficult to raise large amounts of external finance |
| Advantages | Disadvantages |
|---|---|
| Shared capital — more funds available | Unlimited liability for each partner |
| Shared workload and responsibilities | Profit is shared |
| Complementary skills and expertise | Disputes and disagreements between partners |
| Cover when partners are absent | Decisions require agreement — slower than sole trader |
| Better access to finance than sole trader | Partnership dissolves if a partner leaves/dies (unless Deed says otherwise) |
| Advantages | Disadvantages |
|---|---|
| Limited liability — shareholders' personal assets protected | More administration — Companies Act compliance, Companies House filing |
| Can raise capital from private investors (share issue) | Annual accounts are publicly available |
| Separate legal entity — business continues if owners change | Dividend payments reduce retained profit available for reinvestment |
| Corporation tax rates may be lower than income tax | Directors owe duties under the Companies Acts |
| Continuity — not affected by death of a shareholder | Shares cannot be freely transferred to the public |
| Advantages | Disadvantages |
|---|---|
| Access to large amounts of capital via Stock Exchange | Very high administration and compliance costs |
| Increased profile and credibility | Full public disclosure — competitors can see accounts |
| Shares are liquid — investors can sell easily | Risk of hostile takeover |
| Can use shares to acquire other businesses | Directors face intense scrutiny from shareholders and analysts |
| Lower cost of borrowing due to scale | Separation of ownership and control can cause conflicts |
Limited liability means that in the event of business failure, shareholders/members can only lose the amount they invested in shares. Their personal assets (house, car, savings) cannot be seized to pay business debts.
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