What is a disadvantage of a limited company compared to a sole proprietorship or partnership?
Understand the Problem
The question is asking to identify the disadvantage of a limited company in comparison to other business structures like sole proprietorships or partnerships. It presents options to choose from, implying that it expects knowledge about the characteristics and implications of different business forms.
Answer
Higher compliance costs and administrative requirements.
A disadvantage of a limited company compared to a sole proprietorship or partnership is the higher cost of maintaining business compliance, including administrative requirements and filing fees.
Answer for screen readers
A disadvantage of a limited company compared to a sole proprietorship or partnership is the higher cost of maintaining business compliance, including administrative requirements and filing fees.
More Information
Limited companies often face more administrative burdens and higher costs to comply with state or federal regulations, which can be a significant disadvantage compared to the relative simplicity of sole proprietorships or partnerships.
Tips
A common mistake is underestimating the administrative requirements and costs involved with maintaining a limited company, which can lead to compliance issues.
Sources
- Single-Member LLC vs. Sole Proprietorship - Wolters Kluwer - wolterskluwer.com
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