Day: April 23, 2020

One disadvantage of a limited company, relative to other forms of business organisation is . . .?

Select ONE answer:

1. greater regulation.
2. the fact that the company’s liability is limited.
3. the fact that the company is a legal entity separate and distinct from its owner(s).
4. None of the above.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct
2. Not correct – The liability of a limited company (to pay debts) is not limited – it is the liability of shareholders in such a company which is limited (to any amount unpaid on their shares).
3. Not correct – The fact that the company is a legal entity separate and distinct from its owner(s) is considered to be an advantage of a limited company, relative to other forms of business organisation because it is this feature which allows shareholders’ liability to be limited.
4. Not correct

 

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