Day: June 26, 2022

Lucy started and owns “Big Time Art Student”, a small business that sells 100% woollen clothes spun from wool from local Dorset sheep.

Which ONE of the following is MOST LIKELY to be the structure of Lucy’s business?

Select ONE answer:

1. Partnership
2. Co-operative
3. Sole trader
4. Public limited company

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 3

1. Not correct – a partnership is owned by two or more people and “Big Time Art Student”, was set up and owned by Lucy.
2. Not correct – with any co-operative the ownership is shared between many people. Lucy does not share ownership with any other person.
3. Correct – A sole trader is a business set up, owned and run by one person with unlimited liability. Most small businesses start as sole traders because of the simplicity of the structure/it is easy to set up. As Lucy has set up and owns this business herself, meaning she has no partners or shareholders, she can make all of the business decisions and keep the profits herself.
4. Not correct – Public Limited Companies have shares that are traded on the stock exchange and multiple owners are called shareholders which own the business. As a sole trader, this option is not open to Lucy.

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