Types of Business Ownership Summary Sheet
Define Limited Liability:
Define Unlimited Liability: Means that personal assets such as house or car etc. of the owners are at risk if there any financial
problems.
Name Definition
 A sole trader owns and runs
their own business by
themselves.
 Just one person owns the
company
Sole Trader  Capital (money) is raised by
the proprietor himself, usually
from a bank loan.
 The business will always have
unlimited liability, if the
business fails the owner is
responsible for all debts, and
could end up selling all he
owns to pay them off.
 In a partnership 2-20 partners
own the company
Advantages
 This type of business is
easy to set up.
 It is very flexible. The
owner has the freedom to
run the company how they
like.
 He can keep all the profits
to himself.
 Finances are kept private.
(competitors cant see how
good or bad your business
is operating)
 More capital is available
Disadvantages Limited or
Unlimited
 After normal trading Unlimited Liability.
hours, there still remain a
lot of paperwork to be
done, and only one
person to do it.
 There is limited capital,
so it is difficult to grow
 Unlimited liability
 The owner must keep
proper accounts
 There is the danger of Unlimited Liability.
disagreements among

 Capital is raised by the
partners themselves, or from
a bank loan.
 There is a lot of paperwork to
be done by the partners, for
Partnership example – Deed of
Partnership, certificates, and
extra correspondence
 All partners have unlimited
liability
 In addition, if one partner fails
to pay income tax, (for
example), the other partners
may have to pay it for
him/her, as well as to their
own.
than in a sole trader partners
business.
 If some of the partners
 The workload is usually are dishonest or
shared. incompetent, the others
could be left with large
 Professional partnerships debts
mean that certain partners
can be specialists.  Unlimited liability
 More varied ideas can be  Death, retirement, etc. of
aired. any of the partners
threatens to break up the
business