Legal Structure
There are different structures that a business can choose. The most common structure
for start-ups is a sole trader. If a business wants to have limited liability they will be
a LTD
Sole Traders
A business owned by one person.
S/he may employ staff.
Most commonly in the provision of local services.
Advantages
Easy and cheap to set up.
Very flexible to changes in circumstances.
Owner keeps profit.
Independence.
More privacy than other firms.
Disadvantages
Unlimited liability. (Unincorporated).
High risk and limited security for loans.
Limited capital.
Organisational difficulties (holidays/illness).
Limited skills.
Private Limited Companies (LTD)
Funded by shares that cannot be advertised for sale without the agreement of the other
shareholders.
This means that second-hand shares cannot be sold on the stock exchange.
As a result, they are limited in size.
Advantages
Limited liability.
More capital than sole trader.
More privacy than Plc.
More flexible than Plc.
Disadvantages
Shares less attractive because they’re difficult to sell.
Less flexible if expansion needs finance.
Legal formalities compared to unincorporated firms.
Public Limited Company (PLC)
Funded by shares.
Plc’s must issue at least £50,000 of shares, and their shares can be advertised.
Most try to secure a stock exchange listing their second-hand shares to be bought
and sold easily.
There are different structures that a business can choose. The most common structure
for start-ups is a sole trader. If a business wants to have limited liability they will be
a LTD
Sole Traders
A business owned by one person.
S/he may employ staff.
Most commonly in the provision of local services.
Advantages
Easy and cheap to set up.
Very flexible to changes in circumstances.
Owner keeps profit.
Independence.
More privacy than other firms.
Disadvantages
Unlimited liability. (Unincorporated).
High risk and limited security for loans.
Limited capital.
Organisational difficulties (holidays/illness).
Limited skills.
Private Limited Companies (LTD)
Funded by shares that cannot be advertised for sale without the agreement of the other
shareholders.
This means that second-hand shares cannot be sold on the stock exchange.
As a result, they are limited in size.
Advantages
Limited liability.
More capital than sole trader.
More privacy than Plc.
More flexible than Plc.
Disadvantages
Shares less attractive because they’re difficult to sell.
Less flexible if expansion needs finance.
Legal formalities compared to unincorporated firms.
Public Limited Company (PLC)
Funded by shares.
Plc’s must issue at least £50,000 of shares, and their shares can be advertised.
Most try to secure a stock exchange listing their second-hand shares to be bought
and sold easily.
