Economic Concepts: Profit and Income

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10 Questions

What are three important factors influencing the choice of legal structure for a business?

Size of business, Ownership, Finances

Why might a micro or small business consider using a sole trader or partnership as its legal structure?

It is less expensive to set up.

What legal structure might be more appropriate for a business entering a growth stage and needing an injection of money?

Partnership or private company

At what stage of growth might a business consider changing its legal structure to a public company?

Large national or multinational corporation

Why might a business owner choose a sole trader as the legal structure?

To have complete control and ownership

What is the main difference in ownership between a sole trader and a partnership/private company?

Ownership is shared with other people in a partnership/private company.

How might the legal structure of a financially successful business change over time?

It may be altered to better suit the conditions at the time.

What are some external factors that can influence the choice of legal structure for a business?

Legal liability, Cost and complexity of formation, Tax implications

Why is it important for a business to consider the size of its business when choosing a legal structure?

The size can determine the appropriateness and feasibility of certain legal structures.

How do ownership and finances play a role in influencing the legal structure choice for a business?

Ownership determines how control is shared, while finances impact the need for additional capital.

Test your knowledge on profit and income in economics. Learn about the difference between profit and income, and how they are calculated in a business context.

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