AS Business Studies: Choosing the Right Legal Structure

Hey, here are some revision notes mainly for people taking the AQA AS Business Studies Unit 1 exam, but it can probably be used for other exam boards too. I hope this helps you to revise! Please rate and comment on how to improve! :D

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  • Created by: I P B
  • Created on: 17-11-10 12:16

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Page 1

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Choosing the Right Legal
Structure

Page 2

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Specification


Choosing the Right Legal Candidates should be aware of
Structure for the Business the benefits and
drawbacks of legal structures
· sole traders, partnerships, and understand plc's
private limited as a means of comparison.
companies and public limited
companies

· not-for-profit businesses.

Page 3

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Soletrader
Sole traders or sole proprietors are businesses that are owned by one person,
although they may employ any number of people to work for them.

Sole traders are the most common type of business in Britain and they usually
trade under the owner's name. They operate in all sectors…

Page 4

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Advantages and
Disadvantages of a
Soletrader
Advantages Disadvantages

You only need a small amount of capital The business has unlimited liability, sole
to get started traders carry all the risk and
responsibility (they are personally
liable)
The owner takes all the profits and does Difficult to raise additional finance as…

Page 5

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Partnership
A partnership is an agreement between two and twenty people to take joint
responsibility for the running of a business, to share in the profits and to share the
risks.

Entrepreneurs form partnerships usually to expand the business by an increase in
capital or to gain specialist skills that…

Page 6

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Advantages and
Disadvantages of a
Partnership
Advantages Disadvantages

Easy to set up. Partners can make decisions without
consulting the other parties
Business can gain professional help Unlimited liability means that the
through taking on a qualified partner, partners will be liable for any debts
benefiting from a range of expertise…

Page 7

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Private Limited Company
Private limited companies must have the letters Ltd (Limited) after their name, e.g.
Dyson Appliances Ltd.

A private limited company can start up with just one share of 1p in share capital.

The shares cannot be sold on the Stock Exchange. They are usually kept between
family…

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Public Limited Company
Public Limited Companies must have the letters PLC after their name, e.g. Marks &
Spencer PLC. A PLC by law must have at least £50 000 in share capital to start up

They can raise large amounts of capital from the public as they can sell their…

Page 9

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Advantages and
Disadvantages of a limited
company
Advantages Disadvantages

Access to funds through the issue of Banks may see the business as a risk
shares
Stable form of business structure More complicated set up process than
unincorporated business structures
Limited liability is a benefit for the Limited liability might be…

Page 10

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Advantages and
Disadvantages of a Public
Limited Company
Advantages Disadvantages

The main benefit is the scale of funds The process of flotation is expensive.
that can be raised from flotation. A There has to be a minimum of £500,000
successful business that wants to grow minimum in shares, 25% of…

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