Forms Of Business Flashcards
Legal Structure
The form a firm takes in the eyes of the law
Forms of business
Refers to the legal structure of a firm, eg sole trader or company
Legal identity
Refers to the legal structure of a business eg sole trader or company
Unincorporated business
Has no seperate, independent legal identity. The law sees the owner and the business as the same entity
Incorporated business
Has its own legal status or ‘personality seperate from its owners. It can own property l, sign contracts and take legal action in its own name
Sole trader
A personal business owned by one person
Benefits of being a sole trader (list)
Quick and easy to set up
Gives the owner complete control
All profits are kept by one person
Negatives of being a sole trader (list)
Individual is responsible for any debts, payments etc.
Often little time off work
Difficult to raise a lot of finance
Ordinary partnership
A business run and owned by 2-20 people.
Positives of ordinary partnership (list)
Each partner can share skills
Easier to raise finance
Easier to take time off work
Negatives of ordinary business (list)
Each partner is legally responsible for decisions made by other partners
Partners may disagree
Profits are shared
Incorporation
Is the legal process that gives a firm its own legal status.
Shareholders
Are part owners of a company
Company
Is a business with its own seperate legal identity and owned by shareholders.
Private limited company
Private limited company (ltd) are companies where shares cannot be advertised for sale or sold without permission of other shareholders.
