1.4 Comprehension

1.4.1 Answer the questions using your active vocabulary.

1. What is the main topic of the text?

2. What forms of business are described in the text?

3. Why do you think it is relatively easy for sole traders to start their own business?

4. What are the common features of a sole trader and a partnership?

5. Sole traders and partners have limited liability, do not they?

6. What are the main provisions of The Partnership Act of 1890?

7. Why is a company independent of its owners?

8. What is the shareholders’ liability limited to in a company?

9. What is the difference between private companies and public companies?

10. What are the advantages of a company as compared to partnerships and sole traders?

11. What are the disadvantages of a company as opposed to partnerships and sole traders?

12. Why do you think companies have greater opportunities for raising capital and expansion?

1.4.2 Mark these statements t(true) or f(false) according to the information in the text. If they are false say why.

1. Sole traders have limited liability for the debts of their business.

2. A sole proprietorship is a legal entity.

3. Partners as well as shareholders are fully liable for the debts of the business.

4. As opposed to sole traders partners can raise more capital to finance their business.

5. A partnership must be dissolved if one of the partners dies.

6. Both private and public companies offer their shares to the general public.

7. The sole trader needs not only a technical expertise, but also ability in accountancy, marketing, personnel and general administration.

8. A lot of problems associated with partnerships may be overcome by forming a sole proprietorship.

9. Without accounting knowledge it is easy to see the danger signs relating to cash flow or credit control or to obtain the necessary long term capital.

10. A firm is likely to have a variety of objectives which reflect not only the interests of the shareholders but also the managers and other groups within the environment.

11. Decisions relating to the nature of the partnership business and to the day-to-day running of the business require unanimity.

12. Unlimited companies with no limit to the shareholders’ liability do not exist in the UK.

13. In practice, firms have perfect knowledge of market conditions and the situations which face them are predictable.

1.5 Language practice

1.5.1 Match the English word combinations in the left-hand column with the definition in the right-hand column.

1	liability	A	a company whose shares are not publicly available
2	sole trader	B	the system by which shareholders in a company are not liable for its debts beyond the nominal value of their shares
3	dividend	C	a person with overall responsibility for decision making in a business, who receives any profits and bears any losses
4	limited liability	D	a payment of income by a company to its shareholders
5	board of directors	E	a person or company holding shares in a company
6	Memorandum of Association	F	the governing body of a company, which appoints the company’s officers
7	private company	G	the legal obligation to pay debts
8	shareholder	H	a legal document for the report of an agreement that has been reached but not yet formally drawn up and signed