Theory question 105
Business Organisations(a) Differentiate between a sole proprietorship and a partnership.
(b) List four characteristics of a sole proprietorship.
(c) Outline four advantages of a public limited liability company.
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(a) A sole proprietorship is owned, financed and controlled by one person who takes all profits and bears all losses; a partnership is owned by two to twenty persons who contribute capital and share profits and losses according to an agreement.
(b) Any four: one owner; unlimited liability; small capital; owner takes all decisions and profit; easy to form; no separate legal entity; lack of continuity; personal contact with customers.
(c) Any four: limited liability; large capital from the public; continuity (separate legal entity); shares freely transferable; professional management; economies of scale; easier access to loans.
Compare number of owners, liability and capital.