Business ownership study guide

A business structure that is a separate legal entity from its owners, providing limited liability and allowing shareholders to invest capital.

A sole trader is a business owned and run by one person who retains all profits but also bears unlimited liability for debts.

Limited liability means that the owners’ personal assets are protected and they can only lose the amount they have invested in the business.

Limited liability means that the owners of a company are only responsible for the company’s debts up to the amount they have invested. Their personal assets are protected.

A business structure where the owners’ personal assets are protected from business debts and liabilities.

Exam practice

• Which legal structure is most suitable for a small manufacturer that wants to limit owners' personal liability while retaining control over business decisions?
• Explain one key advantage of a limited liability partnership for an online service business.
• Which legal structure gives owners limited liability and allows them to raise capital by selling shares to the public?
• Analyse the advantages and disadvantages of a partnership compared to a private limited company for a small manufacturer that wants to expand its product line.
• Which legal structure gives owners protection from personal liability for business debts?
• Analyse the benefits and drawbacks of setting up a partnership for an online service business that offers freelance graphic design.
• Which type of business structure gives owners protection from personal liability for the company’s debts?
• Explain why a small online service business might choose to register as a limited company rather than operate as a sole trader.
• Which legal structure is most suitable for a new online service business that wants limited liability, the ability to raise capital, and a simple tax regime?
• Evaluate whether a limited liability partnership (LLP) is a more suitable legal structure than a limited company for a small manufacturer that wants to keep decision‑making flexible while protecting personal assets.