Choosing The Appropriate Legal Structure

Question 1

What is a sole trader?

Answer 1

Sole traders are business with only 1 leader and are the most common. They are the easiest to set up but they are the easiest to fail , 70% do. They also have unlimited liability meaning that if they have a huge failure and have lots of debts the bank can legally take away belongings of the person to repay the debt.

Question 2

Partnership?

Answer 2

2-20 people are business that are set up with a couple people who are interested in setting up a business. To start up they need to have a a deed of partnership which makes the company legal

Question 3

PLC?

Answer 3

Are companies which is owned by its shareholders and has floated on the stock market. It also has a negative side to if a person owns more than 50% of the shares he legally has the most votes in a decision

Question 4

Do you know any facts about sole trader partnerships and Plc?

Answer 4

• Sole traders and partnerships and unlimited liability
• PLCs can be took over with someone having 50% of shares
• Partnerships can go wrong easily if the owners fall out
• Sole traders are easiest to fail (70%)
• Sole traders gain no money when sick or away
• PLCs are public and can buy shares

Question 5

What are the advantages and disadvantages of being one?

Answer 5

Sole Trader - easiest to fail but easiest to set up

Partnership - owners can fall out meaning it fails, more ideas

PLCs - Can have takeover if someone has enough shares(50%)
You can make a lot of money from them using shares

Question 6

How do stakeholders expect different things from each one ?

Answer 6

Sole traders’ stakeholders expect worthwhile service and quality products
Partnerships’ stakeholders expect good quality and cheap products that are are innovative
PLCs’ stakeholders expect cheap shares and good profit from the company and cheap products that are quality

Question 7

Do you understand the concept of unlimited and limited liability ?

Answer 7

Unlimited liability - Responsible for debt or bank loans meaning the bank can legally take away you house and assets and personal belonging. Your business + You are 1

Limited liability - when a company isn’t personally linked to the owner so they can’t take away personal belongings