Different forms of business Flashcards
What is legal structure
Refers to the ownership of a business
What does the legal structure of a business determine?
The legal liability of a business
Sources of finances available
Legal record for record keeping and publishing accounts
Degree of risk to owners
Tax and national insurance payments
Responsibilities and rights of decision makers
What is the public sector?
Organisations that are owned by the government, put in place to provide a service to the public - They are funded through taxes and other forms of government revenue.
Police, Ambulance, NHS, Fire Services ect - government owners
What is the private sector?
Businesses that are run by private individuals or organisations - any business not owned by the government
What are the 3 types of private sector companies?
Limited Liability
Unlimited Liability
Non Profit
What is unlimited liability?
The owners of a business are responsible for the total amount of debt of a business. Applies to sole traders and partnerships.
There is no legal separation between the business owner and the business
Is there any legal separation between a business and a sole trader?
There are no legal separations between the person’s (the sole trader) assets and the businesses - If the business isn’t liquid enough to cover debts, assets will be taken and sold from the business owner.
What is limited liability?
When there is a legal separation between the business owner/ owners (including stake holders) So any debts that the business accumulates will have no effect on the owner/ owners (including stake holders)
What are unincorporated companies?
A business and its owners have the same legal identity; the owner is therefore liable for all the businesses actions, including debts.
What are incorporated companies?
A business with a separate legal identity from its owners; incorporated businesses include private and public limited companies
What are public limited companies (PLC’s)
This type of company is listed on the stock market, and anyone that matches requirements (if any) can buy into that company, and become a shareholder.
It’s basically a business where members of the public can buy shares, and the company owners & investors are not liable for any of the debts.
What are private limited companies (LTD’s)
The shares of this type of company are only available to a small group of people. Usually friends, family and the owners of the business.
It’s where a small selected group of people can invest into shares of the business, them & the business owners have a separate legal identity, so they are not liable for any of the debts that the business in-cures.
