Choosing the right legal structure for the busines
The defininitions you need to know...
Unincorporated business: there is no distinction in law between the individual owner and the business itself. Such businesses include sole traders and partnerships.
Incorporated business: this has a legal identity that is separate from the individual owners. Such businesses include private limited companies and public limited companies.
Unlimited liability: a situation in which the owners of a business are liable for all the debts that the business may incur.
Limited liability: a situation in which the liability of the owners of a business is limited to the fully paid-up value of the share capital.
Ownership, control and stakeholders.
Ownership: providing finance and therefore taking risks.
Control: managing the organisation and making decisions.
Stakeholders: any groups of individuals with an interest in a business. This includes employess and shareholders.
A number of factors affect the choice of legal structure. These include
- The need for finance to expand
- The size of the business
- The level of risk involved