legal structures

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  • Legal Structures
  • Unincorporated
    • No distinction in law between the individual owner and the business itself
    • Sole Traders
      • Business owned by one person. The owner may operate by himself or employ other people.
      • Little capital
      • Unlimited liability
    • The identity of the owner and the business is the same
    • Partnerships
      • A form of business in which two or more people operate for a common goal of making a a profit
      • Partners usually have unlimited liability
      • A limited partnership = at least one person takes responsibility and has limited liability
        • Limited or Sleeping partners
          • Receives a dividend in return for their investment
      • Partners with unlimited liability = general or active partners
    • Limited Liability partnership for professional or trading businesses that allows the partners debts to be limited
      • Must register with Companies House (lose privacy)
  • Incorporated
    • Has a legal identity seperate  from the individual owners
    • Organisations can owe money, enter contracts and own assets in their own right
    • Public Limited Companies
    • Private Limited Companies
  • Unlimited Liability = A situation where the owners of a business are liable for all the debts that the business incurs.
  • Limited Liability = A situation where the liability of the owners of the business is limited to the fully paid up value of the share capital
  • Public Limited Company
    • Less Long Term decision making
    • Short term profit necessary
    • Financial Press
    • Involves a loss of control
      • All of the share holders are responsible for  the business
    • 'Plc'
    • Shares are traded on the stock exchange
      • Raise finance more easily
    • A business with limited liability, a share capital over £50,000, at least two share holders, two directors, a qualified company secretary, and usually a wide spread of share holders.
  • Private Limited Company
    • Share capital of only £50,000,
    • A small to medium business that is usually run by the family or the small group of individuals who own it
    • 'Ltd' after their name to warn people they have limited liability
    • Own affairs are reasonably private
    • Owners determine their own aims
    • No pressure to get short term profit
    • Funded by shares that cant be sold without the agreement of other share holders
      • Cant be sold on the stock exchange
    • Usually limited in size
  • Divorce of Ownership and Control
    • In private limited companies
    • Board of Directors are voted for
    • Directors appoint managers
    • Managers and Shareholders grow seperate
    • Difficult for share holders to judge managers decisions
    • Managers may follow their own aims to benefit themselves
    • Positive - Share holders don't understand other stake holders and are too focused on short term finance
      • Stake holder is any individual with an interest in the business. This includes employees, customers, shareholders and the local community


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