legal structures
- Created by: katieshrmn
- Created on: 07-04-15 10:33
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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
- Limited or Sleeping partners
- 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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