1. LEGAL FORMS OF
Toni & Marie
BUSINESS

2. Legal forms of business
Toni
Quit
SOLE TRADER
Toni’s
Toni & Marie
Legal forms of business
FRANCHISE
PARTNERSHIP
PUBLIC LIMITED COMPANY
PRIVATE LIMITED COMPANY

3. Toni
SOLE TRADER
DEFINITION: A business owned and operated by one person, although they can employ staff
Toni Morelli has decided to start a new business, which is an Italian restaurant. As he is the only owner, this makes him a SOLE TRADER. After a few months he has realised that there are advantages and disadvantages to being a sole trader which you can find out about by clicking on the red arrow

4. SOLE TRADER Toni The ADVANTAGES are:
There are few legal regulations when setting up the business
The owner (Toni) has complete control over the business
The owner has close contact with customers
Incentives to work hard i.e. he keeps all the profits
The owner can choose his holidays, pay, breaks etc.

5. SOLE TRADER Toni The DISADVANTAGES are:
No one to discuss business matters with
The business has UNLIMITED LIABILITY
Hard to raise finance as there are no other owners to put CAPITAL into the business
The business is likely to remain small
There will be a lack of specialist skills due to the businesses size
Lack of continuity in event of death, sickness and holidays

6. Toni
SOLE TRADER
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7. TRUE OR FALSE 1. A sole trader can raise finance easily
2. Sole traders have limited liability
3. The owner will have to share profits
4. This type of business is easy to set up
5. The business will grow quickly
6. There will be a lack of specialist skills
7. Sole traders can choose their holidays
8. There are a lot of legal regulations in setting up the business
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8. 50:50 What is a sole trader? Lifelines Internet Ask the class
Questions
What is a sole trader?
A person who sell soles
An individual who co-owns a business with employees A B
An individual who owns a business with and can have employees
A person who owns a shoe company D C

9. 50:50 What advantage is there being a sole trader? Lifelines Internet
Ask the class
Questions
What advantage is there being a sole trader?
The owner can choose his own holidays, breaks
Profits are shared A B
Money is easy to raise
Employees are paid less D C

10. PARTNERSHIP
DEFINITION: A group or association of between 2 and 20 people who agree to own and run a business together
Toni offered his friend Marie, the chance to become a partner. They signed a PARTNERSHIP AGREEMENT which included details of the amount of CAPITAL they invested and the way in which profits would be shared. After a few months, Toni realised there were advantages and disadvantages of a partnership, which you can find out about by clicking on the red arrow

11. PARTNERSHIP Toni The ADVANTAGES are:
Share expenses, responsibility and decision making
The owners have complete control over the business
More CAPITAL is available to invest
Individual partners can offer specialisms
Continuity – partners can cover each other’s absence

12. PARTNERSHIP Toni The DISADVANTAGES are: Disagreement between partners
The business is an UNINCORPORATED BUSINESS. If one partner died, the business would cease to exist
The business has UNLIMITED LIABILITY
The number of partners is limited to 20
One partner could be unreliable or dishonest

13. Toni
PARTNERSHIP
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14. TRUE OR FALSE 1. Partnerships can raise finance easily
2. Partnerships have limited liability
3. Profits aren’t shared in a partnership
4. This type of business is easy to set up
5. The business will grow quickly
6. There can only be up to 20 partners
7. Expenses will be shared
8. The business partners have complete control over business matters
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15. PRIVATE LIMITED COMPANY
DEFINITION: A company in which a number of shareholders (not more than 50) contribute funds to the company in return for shares. Shares can’t be sold on the Stock exchange.
A year later after increasing profits further, Toni and Marie wanted to expand the business further but wanted to protect their private possessions from business creditors if the business failed. After seeking advice from their solicitor, they decided to form a Private Limited Company. This made the business very different from a partnership which you can find out about by clicking on the red arrow

16. PRIVATE LIMITED COMPANY
The ADVANTAGES are:
The business has LIMITED LIABILITY
Easier to raise CAPITAL than partnerships or sole traders as shares can be sold to a large number of people (only friends or relatives)
Toni and Marie can retain control of the company if they don’t sell to many shares
Management is shared
More specialisation can occur
Continuity – the business will still exist if one of the SHAREHOLDERS dies

17. PRIVATE LIMITED COMPANY
The DISADVANTAGES are:
Expensive to set up
Shares can’t be sold to the public
Accounts have to be lodged with Registrar of companies
Less privacy as members of the public can see them
Shares can’t be sold without the agreement of the other shareholders

18. PRIVATE LIMITED COMPANY
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19. TRUE OR FALSE 1. They can sell shares to the public
2. These companies have limited liability
3. There are no shares in this company
4. This type of business is easy to set up
5. The business will grow very slowly
6. There will be a lack of specialist skills
7. Accounts can be seen by the public
8. There are a lot of legal regulations in setting up the business and is expensive
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20. 50:50 What does limited liability mean? Lifelines Internet
Ask the class
Questions
What does limited liability mean?
Shareholders are responsible for all the debts
Profits are shared A B
Shareholders are limited to the amount of money they can invest
Owners are only responsible for the amount of money invested D C

21. 50:50 What does Ltd mean ? Lifelines Internet Ask the class Questions
Limited company
Public limited company A B
Large company
Lifted company D C

22. PUBLIC LIMITED COMPANY
DEFINITION: A company in which an unlimited number of shareholders contribute funds to the company in return for shares. Shares can be sold on the Stock exchange.
Toni and Marie were impressed with their large business and they increased profits dramatically by opening new restaurants around the UK. After a few years it was decided that they needed more CAPITAL to expand the business into other countries. To do this they would have to change their company into a public limited company.

23. PUBLIC LIMITED COMPANY
The ADVANTAGES are:
The business has LIMITED LIABILITY
It is easier to raise finance as shares can be sold on the Stock Exchange and there are no restrictions on selling the shares
Continuity – the business will still exist if one of the SHAREHOLDERS dies
High degrees of specialisation
It is an INCORPORATED BUSINESS

24. PUBLIC LIMITED COMPANY
The DISADVANTAGES are:
The company is vulnerable to takeovers and
SHAREHOLDERS receive some of the profit
Annual accounts have to be published in full
May have communication and management problems due to size
There are a lot of complicated legal issues to overcome when forming and running a PLC

25. PUBLIC LIMITED COMPANY
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26. TRUE OR FALSE 1. They can only sell shares to relatives
2. These companies have limited liability
3. There are no shares in this company
4. This type of business is easy to set up
5. The business could grow very quickly
6. High degrees of specialism will occur
7. Accounts can’t be seen by the public
8. There are few legal regulations in setting up the business and is cheap
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27. 50:50 Which option is an advantage of being a PLC? Lifelines Internet
Ask the class
Questions
Which option is an advantage of being a PLC?
PLC’s can raise finance easily
Owner keeps all the profits A B
PLC’s have sleeping partners
A PLC is cheap to set up D C

28. 50:50 In a PLC, who owns the business ? Lifelines Internet
Ask the class
Questions
In a PLC, who owns the business ?
Managers
Employees A B
Shareholders
Government D C

29. 50:50 Name an advantage of being a PLC? Lifelines Internet
Ask the class
Questions
Name an advantage of being a PLC?
Unlimited liability
Limited liability A B
Finance is difficult to raise
Only one owner D C

30. 50:50 What is a holding company? Lifelines Internet Ask the class
Questions
What is a holding company?
A company that deals in the shipping industry
A company that saves money for companies A B
A company that supplies cover employees
A company that holds majority shares in businesses D C

31. FRANCHISE
DEFINITION: the granting by one company to another company of the right to use it’s products and image
Toni and Marie’s thought it would be a good idea to expand their company further by offering franchises to people. This would mean that they would become a FRANCHISOR, and they would appoint FRANCHISEES to run restaurants under the name of Toni’s.This would provide benefits for both the company and the franchisees, which you can find out about by clicking on the red arrow

32. FRANCHISE The ADVANTAGES to the Franchisor are:
They can expand their business without investing large amounts of money
Risks are reduced because they are shared with the FRANCHISEE
Regular royalty payments are made
Franchisees are usually more ambitious and hard working than some employees
Most franchised businesses are profitable
Expansion is much faster

33. FRANCHISE The DISADVANTAGES to the Franchisor are:
The company’s trade name and reputation can be ruined
The initial high costs of the trial operation
On going costs of national advertising, training and support of franchisees

34. FRANCHISE The ADVANTAGES to the Franchisee are:
Advertising and training is usually paid for by the FRANCHISOR
The business has a greater chance of success as the product will have a good brand image
Banks will be more willing to lend money to a FRANCHISEE
The FRANCHISEE benefits from continuous support from the FRANCHISOR

35. FRANCHISE The DISADVANTAGES to the Franchisee are:
Less independence than a sole proprietor
Continuous royalty payments to the FRANCHISOR
May not be able to sell the business without franchisor’s approval
They could be tied into buying all supplies, at higher prices from the FRANCHISOR

36. FRANCHISE
If you’ve written down all the notes here are some challenges to test your knowledge.
Click here for multiple choice
questions
Click here for essay questions and
other tasks

37. FRANCHISE What is a sole trader?
Name 2 advantages of being a sole trader?
Name 2 disadvantages of being a sole trader?
What type of liability does a sole trader have?
What is a partnership?
What type of liability does a partnership have?
What is a private limited company?

38. FRANCHISE 8. Name 2 disadvantages of being a LTD? 9. What is a PLC?
10. Name 2 advantages of being a PLC?
11. What type of liability does a PLC have?
12. What does this mean?
13. What is a co-operative?
14. What is a franchise?
15. What grade do you want to get from this unit?

39. TRUE OR FALSE 1. A franchisor can raise finance easily
2. Advertising is paid by the franchisee
3. The franchisee can sell anything
4. The business is likely to be successful
5. The business will grow quickly
6. There are less risks involved
7. Profits are shared
8. There company could get a bad name if franchisees run their restaurants badly
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40. 50:50 What is a franchise? Lifelines Internet Ask the class Questions
A completely new idea for a business
A large amount of money A B
A business set up under the image of a successful company
A business sector of the economy D C

41. CORRECT! Your answer is….. Go to the next question
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42. Your answer is…..
WRONG!
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43. Key term definition: Unlimited liability
Write the definition in your key-terms book
“ the owner(s) of the business is/are responsible for all of the debts and losses of the business”
For Toni this could mean that if the business went bankrupt, he would lose the capital that he put into the business and could also lose his personal possessions e.g car, house
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44. Key term definition: Limited liability
Write the definition in your key-terms book
“ the owners (Shareholders) of the company cannot be held responsible for the debts and losses of the company they own ”
For Toni and the shareholders this could mean that if the business went bankrupt, they would only lose the capital that he put into the business BUT they wouldn’t lose their personal possessions e.g car, house
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45. Key term definition: Franchisor
Write the definition in your key-terms book
“ A firm which allows a person to trade under it’s name and to sell it’s product for a fee”
For Toni’s business this would mean that people would have to pay royalty fees to operate under the Toni’s name
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46. Key term definition: Franchisee
Write the definition in your key-terms book
“ An individual or business which pays another firm for the privilege of being allowed to sell its branded products”
For other individuals/businesses this would mean that they would have to pay royalty fees to operate under the Toni’s name
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47. Key term definition: Partnership agreement
Write the definition in your key-terms book
“ This is the written and legal agreement between business partners. It is not essential for partners to have such an agreement but it is always recommended”
For Toni and Marie this would be a written contract concerning the running of the business
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48. Key term definition: Unincorporated business
Write the definition in your key-terms book
“ a business which doesn’t have a separate legal identity”
For Toni and Marie this would mean that if one of them died then the partnership would end.
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49. Key term definition: Incorporated business
Write the definition in your key-terms book
“ a business which has a separate legal identity”
For Toni and Marie this would mean that if one of them died or any of the shareholders then the business would continue to exist.
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50. Key term definition: Shareholders
Write the definition in your key-terms book
“ These are the owners of a limited company. They buy shares which represent part ownership of a company.”
The shareholders of Toni’s will all have a number of shares in the company.
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51. Key term definition: Capital
Write the definition in your key-terms book
“ the money invested into the business by the owners” OR
“goods such as premises, machinery and equipment that a business owns”
Toni’s capital could be the money he’s put into the business or the actual restaurant building
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