Different forms of business

Question 1

What is the legal structure

Answer 1

Refers to the ownership of a business

Question 2

What does a legal structure determine?

Answer 2

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

Question 3

What is the public sector

Answer 3

Public sector: Police, Ambulance, NHS, Fire Services ect - government owners - they handle about 40% of business activity in the UK.

Question 4

What is the private sector

Answer 4

Private sector: Businesses that are run by private individuals or organisations - any business not owned by the government

Question 5

Types of private sector companies

Answer 5

Limited Liability
Unlimited Liability
Non Profit

Question 6

What is unlimited liability

Answer 6

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 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.

Question 7

What are incorporated companies

Answer 7

Incorporated companies = A business with a separate legal identity from its owners; incorporated businesses include private and public limited companies

Question 8

What are unincorporated companies

Answer 8

Unincorporated companies = A business and its owners have the same legal identity; the owner is therefore liable for all the businesses actions, including debts.

Question 9

What is limited liability

Answer 9

An investor’s liability/ financial commitment is limited to the total amount invested or promised in share capital. Applies to LTD/ PLC’s

Question 10

What is a private limited company (LTD)

Answer 10

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.

Question 11

What is a public limited company (PLC)

Answer 11

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.