unincorporated business structures

View mindmap

unincorporated businesses
- do not have limited liability risk losing their personal belongings if fail to pay back debts
- unincorporated means that the individual and the business have the same identity there is no distinction between the two
- usually smaller companies
- 1) sole trader
  - one person running the business means no sharing of profits
  - more control over the business yourself
  - cheaper to run than a limited company as you don't need a separate accounts system you don't have to pay corporation tax
  - unlimited liability if you run into debt your personal belongings are at risk
    - personally liable for all debts
- 2) partnership
  - two or more people means more brains meaning more ideas
  - profits have to be shared
  - unlimited liability if you run into debt your personal belongings are at risk
  - less paperwork
  - trusting your partner can be an issue, the actions of one partner can affect another
    - the owenrs are responsible for debts so one partner could overspend be unable to pay back the money and cause all the other partners to become in debt personally.
its safer for a sole trader or partnership to change their legal structure to a limited company if they wish to borrow money or expand

Get Revising