833515
Description
Mind Map by Alessandra Genco, updated more than 1 year ago
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Created by Alessandra Genco
almost 11 years ago
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UNIT 1: CHOOSING THE
RIGHT LEGAL STRUCTURE
- LEGAL STRUCTURE
concerns the way in which a
business is owned,
controlled and financed
- SOLE TRADER is
a business that is
owned by one
individual and has
unlimited liability.
- Main source
of finance:
personal
savings or
loans from
the bank
- Advantages: easy
and cheap to set up,
complete autonomy,
gets to keep all
profits and speedy
decisions
- Disadvantages: unlimited liability,
nobody to share responsibility and
difficult to raise finance
- Main source
of finance:
personal
savings or
loans from
the bank
- PARTNERSHIPS are owned by
two or more people who do not
have a separate legal identity to
the business, they have
unlimited liability.
- The main
source of
finance is
personal savings
or loans from the
bank
- Advantages: easy and cheap to set
up, more finance, partners bring in
new skills and better decision making
- Disadvantages:
unlimited liability,
scope for conflict,
decision making
may be slow and
any partner may
quit the business
at any time
- The main
source of
finance is
personal savings
or loans from the
bank
- PRIVATE LIMITED
COMPANIES (Ltd) is a
business that is owned by
one or more and acquires a
separate legal identity. The
business can own property,
sue and be sued, they have
limited liability
- Sources of
finance
include loans
and retained
profits,
cannot offer
shares to the
general public
- Advantages: limited liability, greater
capital raising and continuity and
relatively cheap to set up
- Disadvantages: more complex, time consuming,
additional costs and are less flexible
- Sources of
finance
include loans
and retained
profits,
cannot offer
shares to the
general public
- PUBLIC LIMITED COMPANY
(plc) is a business that is owned
by by two or more individuals, it
acquires a separate legal identity
and has limited liability. The
business can own property, sue
and to be sued
- Sources of finance include sale
of shares, loans and retained
profits
- Advantages:
limited liability,
greater chance
of raising
capital and
greater
continuity
- Disadvantages: its most
expensive, less flexible
than sole trader, threat of
take overs and divorce of
ownership and control
- Sources of finance include sale
of shares, loans and retained
profits
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