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Sole proprietors > Sole proprietors - Pg. 5

TyPES oF bUSInESS STRUCTURE AnD ThEIR FInAnCE 5 A disadvantage of a general partnership is that a partner may have to pay all partnerships debts if other partners or a partner are unable to do so. Corporations: These are limited liability businesses that have a separate legal personality from their owners (shareholders). In the event of the company winding up, the shareholders' liability will be limited. There are private limited companies and public limited companies. There are also other types of corporation but these are outside the scope of this book. A major advantage of a limited liability company is the limit placed on a shareholder's liability in the event that the company folds. There are advantages and disadvantages to each type of organization and the type of organization will have a bearing on the methods of finance adopted and on accounting and taxation. The advantages and disadvantages of the three principal types of organization are dis- cussed below.