1. Level 1 Business Studies
1.1 - AS90837
Demonstrate an understanding of internal factors of a small business

2. Types of Business sole trader, partnership, registered company
Students will identify and describe different types of legal entities:
Define and recognise the legal entities of business ownership i.e. sole trader, partnership and registered company
Explain reasons for different forms of legal entities
Explain advantages and disadvantages of each type of entity

3. Sole Trader
A business owned and operated by one person

4. Sole Trader Reasons Relatively easy to establish
Few legal requirements or restrictions to set up
Can employ people with the required skills

5. Sole Trader Advantages
Can be your own boss
Few legal requirements to set up
Able to organise and run the business as you wish
Control over employees
Can choose how long and when to work
Get to keep all profits

6. Sole Trader Disdvantages
Unlimited liability – sole traders are not a separate legal entity
Sources of finance are often limited which can make expansion difficult
Often need to take advice from outside the business

7. Unlimited liability
If the business cannot pay its debts as they fall due, the owners become personally responsible for them.

9. Partnership
Business owned and operated by 2 or more people

10. Partnership Reasons Business run by the owners
Partners contribute capital to set up and run the business
All partners are able to contribute to the running and organisation of the business
Partners share the profits

11. Partnerships Advantages
Increased levels of capital compared to a sole trader
Shared responsibility
Increased knowledge and specialisation
Partners motivated due to sharing of profits

12. Partnership Disdvantages
Unlimited Liability – not a separate legal entity
Partners can disagree on important decisions. It can be time consuming to reach a consensus.
Partners can suffer if one partner is inefficient or dishonest

14. Private Limited Company:
Companies are jointly owned by people with an interest in and have invested in the business
NB: for level 1 Business Studies companies will tend to be private

15. Private Limited Company Reasons
Owned by numerous people - shareholders
Companies are separate legal entities from their owners
Ability to grow and expand
A company can make contracts or legal agreements in its own name

16. Private Limited Company Advantages
All shareholders have limited liability
A large number of people can purchase the shares
Additional shares can be issued in order to raise capital and expand the company

17. Limited liability
The owners of the business will not be responsible for the debts of the business if the business cannot pay.

18. Private Limited Company Disdvantages
Legal issues when being establishing
Cannot sell shares to public
Difficult to transfer shares, all shareholders have to agree
Directors make the decisions on the running of the business – not all shareholders are directors