Legal forms of business

Unincorporated Business
1. No distinction in law between owner and business e.g. sole trader.
Incorporated Business
1. Business has a separate identity to the owners e.g. PLC
Ways a business can be structured
1. Sole Trader
2. Partnership
3. private limited company
4. public limited company
Sole Trader
1. Is a business owned and operated by a single person
2. Advantages
  1. the business owner gets all the profits which means that they own the entire business themselves.
  2. They can make whatever changes they want to the business and nobody else can have a say in this
  3. It will be simple to establish and operate.
  4. The owner can control all of the inflows and outflows of the business
3. Disadvantages
  1. Have unlimited liability so they don't have protection therfore could lose their house etc.
  2. Difficult to get bank loans because they see the sole trader as high risk.
  3. The owner has to take responsibility and face all consequences
  4. I ssues if owner is ill or takes a holiday.
Paternships
1. Is usually between two and 20 people who contribute capital and expertise to an enterprise.
2. Advantages
  1. Different management strategies brought together to work well
  2. Flexibility in working hours and can share the workload.
  3. Cover for holidays and illness.
3. Disadvantages
  1. Less profit
  2. Conflict over ideas.
  3. Control is shared.
  4. They don't have the benefit of limited liability.
Private limited company
1. Advantages
  1. Easy to set up and relatively cheap compared to PLC
  2. Can raise money by selling shares to friends and family
  3. More privacy than a PLC
2. Disadvantages
  1. Can't sell additional shares without approval of shareholders.
  2. Obliged to publish financial info.
  3. Legal formalities for set up
Public Limited company
1. A public company where you can buy shares. limited amount available
2. Advantages
  1. Benefit from limited Liability
  2. Able to raise large sums of money
  3. company likely to be in the media regularly
  4. Shares are sold on the stock exchange.
3. Disadvantages
  1. Company has to publish detailed information which could benefit their competitors.
  2. Company is vulnerable to take overs.
  3. Not all will go on the stock exchange.
limited liability
1. a situation where the owners of a business only are liable for the value of their shares.
Unlimited liability
1. The owners are liable for all the debts of the business

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Legal forms of business

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