This was the most popular question. Most of the candidates who attempted this question were able to define a sole proprietorship in the (a) part of the question, but failed in defining a partnership in terms of its accurate membership limit, for instance, some wrongly defined a partnership as having two or more members. Some of the candidates merely listed the advantages of public limited liability companies and did not explain the points raised in the (c) part of the question. Candidates’ performance was average in this question.

Candidates were expected to provide the following answer to score maximum marks in this question.

(a)  (i) A sole proprietorship is a type of business owned and controlled by an individual with the primary aim of maximizing profit.    
While, a partnership is a type of business set up by two to twenty members with a common goal of making profits. 
(b)  (i) It is set up by a single person who bears all risks.

(ii) Capital is provided by only the owner either from his personal savings, inheritance etc.
(iii) He enjoys all the profits since he provides the capital alone.

(iv) He manages and controls the business alone.
(v) It is not a legal entity because the business is not separate from the owner.
(vi) His death or incapacitation may lead to a collapse of the business.
(vii) He has unlimited liability since losses could extend to his private property.
(viii) Decision making is easy and fast because he does not need to consult other people.
(ix) It is easy to establish because not many legal formalities are needed.

(c)(i) It can raise large capital through the sale of shares.
(ii) It enjoys economies of scale because it can easily expand output or its size of operation.
(iii) It can sue and be sued because it is a legal entity.
(iv) There is continuous existence if a member withdraws or dies because shares are legally transferable.
(v) It enjoys limited liability since shareholders lose only capital invested in times of bankruptcy.
(vi) Shares can be transferred easily through the stock exchange market.
(vii) It is easy for them to get loans from the banks because they have the necessary collateral.
(viii) It can attract highly qualified specialists and experts to ensure efficiency and enjoy economies of scale.
(ix) Ownership is separate from the management to improve corporate governance.
(x) Business risks are shared among many shareholders.