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Unit 2 - Legal - Forms - of - Business

This document outlines and compares the key features of four common forms of business organization: sole proprietorship, partnership, private limited company, and public limited company. A sole proprietorship is owned and operated by one individual who makes all decisions but assumes all risks and debts. A partnership involves two or more individuals who jointly own and operate the business but each partner is liable for debts and actions of others. A private limited company limits liability to contributions and requires 1-100 owners. It provides a formal structure, limited liability, and continuity beyond individuals. A public limited company's shares trade on a stock exchange, allowing it to raise large capital but requiring greater regulations and public disclosure.

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23 views14 pages

Unit 2 - Legal - Forms - of - Business

This document outlines and compares the key features of four common forms of business organization: sole proprietorship, partnership, private limited company, and public limited company. A sole proprietorship is owned and operated by one individual who makes all decisions but assumes all risks and debts. A partnership involves two or more individuals who jointly own and operate the business but each partner is liable for debts and actions of others. A private limited company limits liability to contributions and requires 1-100 owners. It provides a formal structure, limited liability, and continuity beyond individuals. A public limited company's shares trade on a stock exchange, allowing it to raise large capital but requiring greater regulations and public disclosure.

Uploaded by

Adjepole
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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UNIT

LEGAL FORMS
OF BUSINESS
ORGANISATION
Sole Proprietor ( Trader)

It is a business owned by one


person who is known as
the proprietor.
Advantages:

Owner makes all decisions


Owner is his or her own boss
Ifthe business prospers, the owner
receives and keeps all the profits.

This type of business is easy to start up or


close (liquidate)
Disadvantages

 Owner is responsibility for all debts


 Once the owner dies, the business closes
 Funding may be difficult to obtain
Partnership

It is simply an agreement between


two or more people to set up
( run) a business.
Advantages
Two heads (or more) are better than one
Capital – It is easy ro raise huge capital
( greater financial resources) due to number
of partners
Profits are to be shared equally between
the partners.
Decision Making involves all the
partners.
Disadvantages
There is a risk of disagreements among
partners
Partners are personally liable for all
business debts and obligations, including
court judgments.
Each partner is an agent of the partnership
and is liable for actions by other
partners
Partnerships are more difficult to close
down than sole proprietorships
Private Limited Company (plc)/ SARL

A Private limited company (plc) is simply


where the liability is limited to contributions,
and requires 1-100 people, especially because the
shares in
the capital are not freely accessible without
agreement of all or part of the shareholders.
 (Une société à responsabilité limitée (SARL) est
une société commerciale où la responsabilité est
limitée aux apports, et qui présente des caractéristiques
d'une société de personnes (1 à 100 personnes),
notamment parce que les parts détenues dans le capital ne
sont pas librement accessibles sans accord de tout ou
partie des associés.
Advantages
Recognised formal structure
Limited liability
Shareholders appoint directors to run the
company
Ability to pay dividends in lieu of salary
Separation of personal & company assets
Continuity of business beyond
the individual
Disadvantages
Profits have to be shared out amongst a
potentially larger number of people
Detailed Legal procedures must be
followed to set up the business –
consuming time and money

Financial information can be inspected


by any member of the public once filed
with the Registrar, including competitors
Public Limited Company ( PLC)/ SA

It is simply a company whose


shares are floated (sold, traded) on
a stock exchange and can be bought
and sold by anyone (public).
Advantages
There is limited liability for the shareholders.
The business has separate legal entity. There
is continuity even if any of the shareholders die.
These businesses can raise large capital sum as
there is no limit to the number of shareholders.
The shares of the business are freely
transferable providing more liquidity to its
shareholders .
Disadvantages
There are lot of legal formalities required for
forming a public limited company. It is costly and
time consuming.
In order to protect the interest of the ordinary
investor there are strict controls and
regulations to comply. These companies have to
publish their accounts.
The original owners may lose control.
Public Limited companies are huge in size and
may face management problems such as slow
decision making and industrial relations problems.
Thanks

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