Business ownership structures

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  • Created by: mary9
  • Created on: 10-02-15 17:40

Business ownership structures

Every business needs an appropriate legal structure. there are a few different types to choose from - including sole trader, partnership and private limited company, they all have there advantages and disadvantages.


most small businesses are sole traders, you dont need to do anything apart from trading, examples of this includ plumbers, hairdressers, newsagents and fishmongers.

Advantages are

  • they're really easy to set up, get an idea and you're in business
  • you get to be your own boss
  • you alone decides what happens to any profit

Disadvantages are

  • you have to work long hours
  • you have unlimited liability, which means that should the business go bust owing 10 million, you may have to sell everything you own in order to pay the debt.
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Business ownership structures


partnerships are not actually that common - you mostly get them in jobs like accountancy, solicitors and doctors

partners have an equal say in making decisions and an equal share of the profits - unless they have an agreement called a deed of partnership which states different 


  • more owners means more ideas, and more people to share the work
  • more owners means more capital (money) can be put into the business


  • each partner is legally responsible for what other partner(s) do
  • like sole traders, most partnerships have unlimited liability. Although some partnerships can have limited liability
  • more owners means more disagreements you're not the only boss. if the partners disagree about which direction the business should go in or how much time to put in, it can get really unpleasent 
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Business ownership structures

Limited Company 

limited company has special status in the eyes of the law. These types of company are incorporated, which means they have their own legal identity and can sue or own assets in their own right. The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder.

Because limited companies have their own legal identity, their owners are not personally liable for the firm's debts. The shareholders have limited liability, which is the major advantage of this type of business legal structure.

Unlike a sole trader or a partnership, the owners of a limited company are not necessarily involved in running the business, unless they have been elected to the Board of Directors.

there are two types 

  • Private Limited Company LTD
  • Public Limited Company LPC
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