1. Business structure
Legal structures

2. Legal structures Learning outcomes
Understand the concept of limited liability
Know the main features of different types of legal structure
Understand the appropriateness of legal structures
Know the problems that can occur when changing the legal structure

3. Types of businesses in the private sector
Sole traders
Partnerships
Private Limited Companies (Ltd)
Public Limited Companies (PLC)
Cooperatives
Franchises

4. Incorporation
If you started up in business, then the law would see you and your business as one and the same.
Therefore, in law any debt owed by the business is also owed by you!
In order to reclaim that debt a creditor (someone your business owes money to) can claim your personal possessions (including your dog and your shoes).
This is called unlimited liability!

5. Incorporation
Unlimited liability can be avoided if you ‘incorporate’ your company.
You then have limitied liability and can only lose the money you have invested in the company.

6. Unlimited and limited liability
unlimited business owners risk losing all personal assets if the venture fails
Owner and business DO NOT have a separate legal identity
owners have unlimited liability
limited business owners are only liable to lose their original investment if the business fails/ becomes insolvent
Owners and business have a separate legal identity
shareholders have limited liability

7. Incorporation
You should be asking yourself; why doesn’t every company become incorporated?
We shall look in detail at this later.
Questions:
What is unlimited liability?
What is limited liability?
What is incorporation?

8. Types of Business Sole traders Partnerships
Private Limited Companies (Ltd)
Public Limited Companies (PLC)
Describe.
Table of 3 main advantages and disadvantages.

10. Discussion point
What happens to the form of ownership as a business grows?

11. Private Limited Company Public Limited Company
Sole Trader
Partnership
Private Limited Company
Public Limited Company
Why?
Why not?

12. Other forms of business org
Cooperatives
Franchises

13. Cooperatives Common form of organisation in agriculture and retailing
Owned jointly by members (can be private individuals or businesses)
Aim: to achieve mutual benefits for all members
All members share equally in decision making, work load, responsibilities, profits, etc.
All members have one vote at important meetings

14. Cooperatives Benefits: Drawbacks: Bulk buying
Working together to solve problems and take decisions
Good motivation as profits are shared
Drawbacks:
Poor management skills – unless professional managers are employed
Capital shortages – cannot issue shares
Slow decision-making

15. Franchises Not a legal structure
Def: It is a legal contract between two firms that allows one of them (the …………….) to use the name, logo and marketing methods of the other (the …………….)
Franchisee decides the form of legal structure to adopt
Franchise business allows businesses to expand rapidly
Eg. …………………………