Unit 1.2 Understanding Business Forms

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Different Types of Business Forms

  • Sole taders
  • Partnerships
  • Private limited company
  • Public limited company
  • Co-operatives

Legal Structure of a Business

Sole Trader

A self-employed person such as a grocer, plumber, or taxi driver. They directs the affairs of the enterprise, bears its risks and losses, and takes the profits and benefits. The owner may operate on their own or may employ other people.

Unincorporated

There is no distinction in law between the induvidual owner of the busines an the business itself. The identity of the business and the owner is the same.

Unlimited liability

A situation where the owner of the business is liable for the debts of the business as the business and the owner is the same.

Partnership

A legal form of business operation between two or more individuals who share management and profits. Very similar to a Sole Trader.

Private Limited Company

A type of company that offers limited liability (legal protection) for its shareholders but that places certain restrictions on its ownership. These restrictions are defined in the company's bylaws or regulations and are meant to prevent any hostile takeover attempt. The company is funded by shares from stakeholders, must have LTD after the company name to make others aware that they have limited liability and are able to keep their affairs private.

Incorporated

This business has a legal identity that is separate from the owners. As a result, they can own assets, owe money and enter into contracts in their own right.

Limited liablity

A situaton where the liability of the business does not get passed

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