Company Law Questions with Verified Answers

Company Law Questions with Verified Answers Sole Trader Advantages - correct answer -⟨ No filing requirements; fees or professional advice needed for set up ⟨ One person, thus a complex organizational structure is not needed. Sole Trader Disadvantages - correct answer -⟨ Not a particularly useful business form for raising capital (finding investors) -money is usually from bank loans or savings ⟨ Unlimited liability: if business fails creditors can come after your personal assets, ie., no difference from the trader and the business. Partnership Advantages - correct answer -⟨ No legal filing requirements, only 2 or more members needed ⟨ Allows the pooling of resources / capital, being jointly liable for debts ⟨ Flexibility: If you're aware of the problems the Partnership Act can cause you can draft an agreement to vary these terms with a reflection of your intentions when entering the partnership - ie, specify responsibilities of members' involvement, profit share, etc. Partnership Disadvantages - correct answer -⟨ Partnership Act 1890 can be a danger to the unwary, ex., may not know, despite business being successful, if partner dies business ceases to exist. ⟨ Jointly liable for debts, that is, creditor can come after one partner for debts owed by all. ⟨ entitles each partner to an indemnity in respect of liabilities assumed in the course of the partnership business ⟨ If a partnership agreement wasn't made the Act entitles partners to participate in management; entitled to equal profit share; entitled not to be expelled.