Identify TWO characteristics each of the following business set ups. (6 marks)
i) Sole proprietorship.
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- The organisation is owned and run by an individual who makes all business decisions.
- A trading name may be used, but there is no legal distinction between the individual and the business.
- It is easy to set up and close down the business.
ii) Partnership.
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- The business is owned and run by two or more individuals.
- A partnership name may be used, but the partnership is not a legal entity.
- The partners are liable for the conduct and debts of the business.
iii) Limited companies.
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- A limited company has a separate legal personality from its owners (shareholders).
- The shareholders cannot normally be sued for the debts of the business unless they have given some personal guarantee.
- Their risk is generally restricted to the amount that they have invested in the company when buying the shares. This is called limited liability.