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Business structure

Business structure. Legal structures. 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

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Business structure

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  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) • PublicLimitedCompanies (PLC) • Cooperatives • Franchises

  4. Incorporation • Ifyoustarted up in business, thenthelawwouldseeyou and yourbusiness as one and thesame. • Therefore, in lawanydebtowedbythebusinessisalsoowedbyyou! • In ordertoreclaimthatdebt a creditor (someoneyourbusinessowesmoneyto) can claimyour personal possessions (includingyourdog and yourshoes). • Thisiscalledunlimitedliability!

  5. Incorporation • Unlimitedliability can beavoidedifyou ‘incorporate’ yourcompany. • Youthenhavelimitiedliabilityand can only lose themoneyyouhaveinvested in thecompany.

  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 • Youshouldbeaskingyourself; whydoesn’teverycompanybecomeincorporated? • Weshall look in detail at thislater. • Questions: • Whatisunlimitedliability? • Whatislimitedliability? • Whatisincorporation?

  8. Types of Business • Sole traders • Partnerships • Private Limited Companies (Ltd) • PublicLimitedCompanies (PLC) • Describe. • Table of 3 mainadvantages and disadvantages.

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

  10. Why? Whynot?

  11. Other forms of business org • Cooperatives • Franchises

  12. 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

  13. Cooperatives • Benefits: • 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

  14. 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. …………………………

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