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Legal Structure Pt2
Pros and cons of legal structure of businesses
| Question | Answer |
|---|---|
| Sole trader advantages | Makes all decisions, keeps all profit |
| Sole trader disadvantages | Unlimited liability -> owner is legally responsible for the business |
| Partnership advantages | Shared workload (2-20 employees) |
| Partnership disadvantages | Unlimited liability -> owners are legally responsible for the business |
| Private company advantages | Limited liability, easier to get finance. Invites 2-50 private shareholders |
| Public company advantages | Limited liability, easier to get finance. Shares are sold to the public to purchase at exchanges |
| Shareholders | A person who owns shares in a company -> is a partial owner of the company. Paid in dividends. |
| Legal structure options | Sole trader -> partnership -> private company -> public company |
| Size | As a business grows, it's legal structure will need to change. More owners will bring in more money, but growing requires money as well. |
| Progression of size | Sole trader -> Partnership or private company -> public company |
| Control | Total control -> sole trader Partial control -> Partnership or private company Control divided against shareholders -> public company |
| Loans/Finance | Sole trader/partnership -> unlimited liability -> owners are responsible -> small loans Private/public company -> limited liability -> larger loans -> |
Created by:
MrMemer
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