U2-1 Legal Structure

U2-1 Legal Structure

1. Sole Trader

   • 1 person owns and has full liability of the business
   • Advantages
     • Can make all the decisions
     • Can keep all the profit
     • Choose own hours
     • Easy to set up
   • Disadvantages
     • No-one to share ideas with
     • All worry and risk for self
     • Unlimited liability
     • Hard to take holidays/ sick leave
     • Limited ideas

2. Partnership

   • 2-20 owners take responsibility
   • Advantages
     • Share decisions and more ideas
     • Shared risks
     • Wider skill sets
       • Salesperson, accountant etc
     • Able to take leave and holidays
     • More finance available
   • Disadvantages
     • Share profits
     • Arguments over decisions
     • If a partner leaves, partnership disbanded
       • Deed of partnership
         • Voluntary document, states working hours, responsibility, profit share etc

3. Private Limited Company (LTD)

   • Can sell shares, but only to friends & family
   • Advantages
     • Sell shares - more capital
     • Owners have more loyalty
     • Limited liability
   • Disadvantages
     • Raise less capital than a PLC
     • Shareholders mean you risk losing full control over the direction of the business
     • Strong possibility of arguments within family
     • Shareholders want profit on their investments

4. Public Limited Company

   • Advantages
     • Can sell shares to public
       • Raise a lot of capital
     • Limited liability
   • Disadvantages
     • May be taken over by a shareholder
     • Shareholders might want short-term returns
     • Expensive to set up

5. Franchise

   • Advantages
     • Tried and tested brand
     • Set up using well-known existing brand name
   • Disadvantages
     • Royalties paid to the franchisor
     • Make few decisions for the business