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 on: 17-11-10 12:16
Preview of AS Business Studies: Choosing the Right Legal Structure

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Choosing the Right Legal

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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
· not-for-profit businesses.…read more

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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 of the economy. For
example, some farmers in the primary sector, some builders in the secondary
sector and some hairdressers in the tertiary sector of the economy are sole
traders.…read more

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Advantages and
Disadvantages of a
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
The owner takes all the profits and does Difficult to raise additional finance as
not share them with anyone else soletraders have limited funds and
banks are unlikely to help.…read more

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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
Entrepreneurs form partnerships usually to expand the business by an increase in
capital or to gain specialist skills that are required for the business to develop
The aims of a partnership are usually similar to a sole trader i.e. profit, survival,
stability and people may enter into a partnership for a number of reasons.…read more

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Advantages and
Disadvantages of a
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
New Partners - New Ideas All the partners could face financial ruin
for one partners mistake
Extra partners bring extra capital, easier Disagreements between partners could
access to finance.…read more

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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 and friends. Therefore tends to have a small number of shareholders.
Anybody wanting to sell share in a LTD has to have the permission of the majority
of the shareholders.…read more

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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
shares through the Stock Exchange. PLCs tend to have large number of
shareholders. They are larger businesses that benefit from economies of scale.…read more

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Advantages and
Disadvantages of a limited
Advantages Disadvantages
Access to funds through the issue of Banks may see the business as a risk
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 a benefit for
shareholders, who may see the risk as shareholders, but lenders may see it as
more acceptable than if the business a risk
were unincorporated…read more

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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 that must
may find many investors wanting to buy be sold before the plc can trade.…read more


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