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Legal forms of business

By Sam Richards

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Different types of main legal businesses!

  • Sole Traders

  • Partnerships

  • Private limited company (PLC)

  • Public Limited company (LTD)

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Sole traders

  • This is a business owned and operated by a single person.

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Sole traders

  • Another name for sole traders is sole proprietorships which is the most common form of business for example florists and builders.

  • Sole traders pay income tax instead of corporation tax. Because there not corporations there just single handily run by one person.

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  • A partnership run business is when 2-20 people set up a business together with the aim of making profit. The profits are usually shared out by how much time someone sends working or how much money they invested at the start of the business. This is called owning a share in a business.

  • As a result of this is means a contract has to been drawn up which is called DEED OF PARTNERSHIP so nobody in the business can argue against how much they money they deserve.

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Advantages and disadvantages of partnerships



  • Spreads the risk.

  • Business can still trade if one person is ill.

  • As there are many partners different people can bring different skills to the business.

  • Stress if you was to go into a family business.

  • Decision making would take longer.

  • Unlimited liability.

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Private Limited liability

  • PLC can start up with as little as £2 in share capital. So if the shares where worth 50p then you would have 4 shares in the business.

  • Normally there run by directors, share holders appoint them to control and make strategic decisions for the company.

  • Owners and shareholders are protected by limited liability so they can only lose as much as they put into the business if the company goes bust.

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Public limited company

  • The difference between public and private is public must have at least £50,000 worth of share capital to begin trading.

  • The owners are the business which makes them very different to sole traders and partnerships.

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PLC & LTD forms they need to do to become a business.

Articles of association

Memorandum of association

  • Name of company

  • Objectives of business

  • Amount of share capital

  • Registered office address

  • Status of shareholder liability

  • Distribution of profits

  • Role of company directors

  • Meeting procedures

  • Voting rights of shareholder

Memorandum of association is who you are what you do and where your based whereas articles of association is an internal ‘rule book’ which sets out how the business will be run.