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LEGAL STRUCTURES

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Syllabus:

Candidates should be aware of the benefits
and drawbacks of legal structures and
understand plc's as a means of comparison.

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Objectives:

Be able to define and explain the differences
between all 5 different legal structures.
Be able to discuss the advantages and
drawbacks of all 5 different types of legal
structures.
Be able to explain reasons for choices of legal
structures in different situations.

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Creditors:
those a business owes money to
(e.g. banks and suppliers).

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Owned Sources of Advantages Disadvantages
by: Liability:
Finance:
Sole
owner/
trader




Partne
rship




A ltd
Co.

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A sole owner/trader
owns and runs
their own business.
E.g. corner shop.

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Funded through
personal finance or
borrowing from lenders,
e.g. bank.

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Advantages:
Can begin with small investment ­ no or little
borrowing, keep all profit full control, can
make their own decisions, own timing, no
formal rules, solely responsible for success.

Disadvantages:
Limited capital, no help or support, solely
responsible for failure, has to rely on
own knowledge, skills and experience.

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A partnership exists when two or
more people (up to 20) start a
business without forming a
company.

Usually used by professionals
in medicine or law.

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Funded through
personal finance from partners
and borrowing from lenders,
e.g. banks.

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