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Review Your SQE 1 Practice Records

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Rebecca Green is starting a new business and is considering different business structures. She is particularly interested in the differences between a sole trader and a limited liability partnership (LLP). Rebecca wants to know the key distinctions that might influence her decision. 


Which one of the following statements is correct?

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A sole trader structure offers more flexibility in management than an LLP. Sole traders have complete control over their business decisions without needing to consult partners, whereas LLPs involve shared decision-making among partners. Option A is incorrect because sole traders have unlimited liability. Option B is incorrect as partners in an LLP have limited liability. Option D is incorrect because LLPs are typically not taxed as separate entities; instead, partners are taxed personally on their share of the profits. Option E is incorrect because sole traders can employ others. 


Key Point: This question examines the differences between sole traders and LLPs, focusing on management flexibility and liability, which are crucial considerations when choosing a business structure.

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