Unit 3: Legal Structures Flashcards
What is meant by a Sole Trader?
A sole trader is a business owned by One Person (though this business may employ a large number of people)
What are the Advantages of being a Sole Trader?
Cheap + Easy to set up
All profits go to you
you are the only boss- no conflict
What are the Disadvantages of being a Sole Trader?
Finance can be difficult to raise
Illness/ Holidays, etc. may affect the running of the business
Long Hours of work
Unlimited Liability
What is meant by a Partnership?
A business/ association between 2+ owners of a business.
Partnerships usually consist of 2-20 members
What are the Advantages of a Partnership?
More Capital can be raised from partners
Members of the Family can be introduced to the business
Affairs can be kept private
Workload, Risks + Responsibilities are Spread among partners
What are the Disadvantages of a Partnership?
Unlimited Liability
Disagreements/ conflict between partners
Profits get Shared
What does ‘Ltd’ mean?
Private Limited Company
What does ‘PLC’ mean?
Public Limited Company
What is a Private Limited Company?
A company that has limited liability, but cannot sell shares to the general public.
They are not listed on the Stock Exchange
What are the Advantages of a Private Limited Company (Ltd)?
Has More Status than a sole trader/partnership
More Confidence in the business, as it has Legal Status
Original Owners remain as directors + senior managers, and so continue to run the business
Limited Liability
What are the Disadvantages of a Private Limited Company (Ltd)?
Isn’t listed in the Stock Exchange - they can’t offer shares to the public
Share prices are not quoted daily- shareholders aren’t sure what their shares are worth
What is a Public Limited Company (PLC)?
A company that is Listed on the Stock Exchange
Therefore, they’re able to sell shares to the general public
What are the Advantages of a Public Limited Company (PLC)?
Selling Additional Shares allows them to raise substantial capital
Higher status than a Ltd
1000s of shareholders wanting to know the company’s performance Attracts More Publicity
Limited Liabilty
What are the Disadvantages of a Public Limited Company (PLC)?
Original Owners often lose control, as a high proportion of shares are sold
Professional Directors + Managers appointed to run the business may have different aims to the shareholders
The company can be Taken Over if a majority of shareholders agree to a bid from another business
What is Limited Liability?
Investors (shareholders) and owners can only lose their investment in the business if it fails
They cannot be forced to sell their personal assets to pay off the business debts
