One has to tkae on all its own debts with its own money (sole trader)the other has to pay for debts out of shareholders monney (limted liabity)The term limited liability means that costs can only be taken on by the company up to a limit.The disadvantage of the second option is separation ownership and less control over the organisation.Plus side is shareholders can vote & impeach leaders who beahave outside of the companies best interests.hope this helps