Legal Structure Of A Business. Unit 1.

The legal structure of businesses. The advantages and disadvantages for each structure. In Note form.

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  • Created by: Ravali
  • Created on: 02-05-11 10:20

Legal Structure of A Business.

A Business can either be a:

  • Sole Trader
  • Partnership
  • Private Limited Company (Ltd)
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Sole Trader.

Most small businesses are sole traders.

Sole trader - Advantages

  • Easy to set up.
  • You are your own boss.
  • You decide what to do with profit.

Sole trader - Disadvantages

  • You have to work long hours.
  • Not many holidays
  • Unlimited liability.
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Partnerships are not that common. Partners have an equal say in making decisions and an equal share of profits - unless they have an agreed to a deed of partnership which says different.

Partnership - Advantages

  • More owners = More ideas and more people sharing the workload.
  • More owners means more money (captial) can be put into the business.

Partnership - Disadvantages

  • Each partner is legally responsible for what all the other partners do.
  • Unlimited liabilty.
  • The more owners there are in the partnership, the more disagreements there may be.
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Private Limited Company (Ltd)

They must have a Memorandum of Association, which tells everyone else who the business is and where it's based. They must also have an Article Of Association, which sets out how the business will be run.

Ltd - Advantages

  • The big advantage over both other ownerships, that Private Limited Companies have Limited Liabilty.

Ltd - Disadvantages

  • They're more expensive to set up than partenerships because of all the legal paperwork.
  • The company is legally obliged to publish its accounts every year, unlike sole traders or partnerships.
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henry benson


what about public limited companies




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