Business options 2: Business: Pearson (Edexcel): GCSE (9:1)

Legislation

Laws that are made by governments

Legal identity

A company, corporation or other structure that has legal standing, can make contracts, incur debt and assume liabilities.

Sole Trader

A person who owns and runs the business, and has legal responsibility for all liabilities of that business

Private Company

An incorporated legal structure with separate legal identity that offers its owners limited liability, whose shares are not available to the public and has certain legal obligations and rules to follow. Usually small to medium size, or family businesses. Has Ltd at the end of its name

Public Company

An incorporated legal structure with separate legal identity that offers its owners limited liability, whose shares are publically available to buy and sell and are listed on the stock exchange. It has to follow certain legal rules and obligations. Usually large companies or multinationals. It has the letters PLC after its name

Partnership

A legal structure similar to being a sole trader but when two or more people who own and run the business have joint and several liability and are

Sole Trader - Advantages

Easy to set up, revenue and profit taxed as your personal income, few legal obligations and rules, the owner-operator has full control of the business

Sole Trader - Disadvantages

Unlimited liability for debts, lack of continuity, lack of specialisation, unable to take advantage of economies of scale, no separate legal identity from the business

Private Company - Advantages

Limited liability, separate legal identity, few shareholders so owners have control of the business and the profits

Private Company - Disadvantages

More expensive to set up, more rules and legal obligations, have to publish accounts every year

Public Company - Advantages

Much more capital can be raised to fund the business, limited liability and separate legal identity, can expand and take advantage of specialisation and economies of scale

Public Company - Disadvantages

Majority of shareholders have to agree on major decisions, profits are shared more widely, more legal obligations, public accounts, can be taken over

Social Enterprise

Can make a profit but must benefit society

Franchise

A business that buys the right to use the name and sell the products and services of another company. i.e. Fast food outlet