Legal Structures.

Legal Structures

There are many legal structures available for a business to have. Examples of these are a sole trader, a partnership, private limited companies (Ltd) and public limited companies (PLC).

A sole traders are businesses owned by one person. They tend to be small businesses but don't always have to be. As a sole trader, the owner has complete control over the whole business. This means that the aims and objectives usually reflect the owners personal interests. The aims and objectives are usually about survival, expanding and/or providing a flawless customer service. They could also be about profit too. They may be a sole trader so that they can work for themselves without having any unwanted pressures. However, some sole traders usually have limited financial backing and some aims are out of reach for them. These are things like becoming a multinational  business. Some aims may also only be achievable in the long run. 

Examples of sole trader business' are businesses such as-

• Window cleaners
• Mobile hairdressers
• Writers
• Farmers
• Plumbers
• Artists

A partnership are businesses owned by two or more people. The maximum amount of owners is usually around 20 people. Partnerships are not companies. This is because businesses that are partnerships usually provide services that will not cause them to run up massive debts. This means that they will not need the protection of limited liability. However, some large accountancy firms may become limited liability partnerships. The aims of partnerships tend to be things like providing customers with high quality services, making sure that partners' in the business are safeguarded and expanding through efficiency and a good reputation. On the other hand, a partnership offers no personal asset protection for the partners of the business. A partner may be even liable for the careless acts of another partner.

Examples of partnership business' are businesses such as-

• Doctors
• Dentists
• Architects
• Stockbrokers
• Estate agents
• Solicitors

Private limited companies are normally owned by one or a small number of share holders. The shares can only be sold privately and this means that the owners have control over what happens to the business. Small businesses that have either high levels of raw materials or make products over a long period of time before selling them can be private limited companies. This is because of the danger of getting into debt and having to sell personal possessions to be able to pay for them. An advantage of a Ltd company is that more capital can be raised as the maximum number of shareholders allowed is 50. On the other hand, a disadvantage is that the shares in a private limited company cannot be sold or transferred to anyone else without the agreement of other shareholders. This means that growth may be limited.

• Some private limited companies are owned by only two people and one of the owners has most of the shares. It is also possible for private limited companies to have single owners. With these two types of company the single/main owner will set the aims and objectives. With larger private limited companies the people with the most shares work together to set the objectives. 

Examples of Private Limited Companies (Ltd) are businesses such as- 

• Builders
• Garden centres
• Large farms
• Merchant banks
• Local garages
• Local grocery stores

Public limited companies are called 'public' because any member of the general public can buy shares in the company. The general public are able to do this because the company is on Stock Exchange and is available to buy into. In terms of capital value and turnover, there are pretty small companies available on the Stock Exchange. However, most PLC's are very large companies and are normally ones that are well known. There are a number of PLC's that are so powerful, they can ignore their individual shareholders and set their own aims and objectives. These include aims such as being the market leader, capturing market share and establishing a good public image. Examples of advantages of a PLC company are that the business has separate legal entity. There is continuity even if any of the shareholders die. On the other hand, disadvantages are that there are lot of legal formalities required for forming a public limited company. It is costly and time consuming.

Examples of Public Limited Companies (PLC) are businesses such as-

• Barclays- Banking
• Vodaphone- Telecommunications
• EasyJet- transport
• Weatherspoons- Leisure & hotels