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Different Types of Business.

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Legal Status of a business Different Types of Business Sole Traders A sole trader is the simplest form of business organisation. There are no legal requirements - you simply set up and get on with trading. Any income or profit that you earn is yours and yours alone and you pay income tax on that income. There are few legal constraints and you have what is called unlimited liability. This means that any debts are your debts and so if you stop trading with large debts, you will be personally responsible for these debts. Creditors will have a claim on your house, yacht or any other personal assets you may have. * Advantages o Cheap and easy to start o All the profit is yours o You are your own boss o You do all the work * Disadvantages o You have NO limited liability o All the risk is yours o What about sickness and holidays? o Do you have all the skills? Tax implications There are also important tax implications of operating a sole proprietorship. Net business income from a sole proprietorship must be included as part of the sole proprietor's personal income. ...read more.


Unlike a sole trader where the liability is unlimited, with a limited company the liability is limited to the value of the shares issued. This means that any debts are debts of the company and not of the owners. To form a limited company it must be registered at Companies House and the firm must have various legal documents including a Memorandum and Articles of Association. There need only be one director and they have to prepare annual accounts and submit them to Companies House. Private limited companies can range significantly in size. * Advantages o You have limited liability o Easier to raise larger sums of capital o More flexible than PLCs o Opportunities for bringing in more skills * Disadvantages o You can only sell shares privately o Not very flexible if expansion becomes possible o More legal formalities than sole traders Public limited company Like a private limited company, a plc has shares, but the key difference is that these shares can be bought by anyone freely on a stock exchange. Ownership is therefore open to anyone who wants to buy shares. PLCs have legal requirements in that they have to produce annual reports and accounts and file them with Companies House. ...read more.


To continue using the name, the franchisee will usually have to pay a set fee either every month or every year. These fees can be substantial. In exchange, the franchisee gets to use the franchise name and sell the franchise product. People will know your business name and you will not have to spend time developing a marketing plan or customer recognition of your business. o There are many complicated legal issues involved with buying and operating franchises. You should consult a lawyer and an accountant if you plan to enter a franchise agreement. Laws of business Memoranda and articles of association The memorandum of association defines the following key points: The company name The address of the registered office A statement of limited liability A statement of the companies authorised share capital and share price. What the company will do (the objects) Statutory Books Statutory Books are the official records kept by the company relating to all legal and statutory matters Statutory declaration Partnership agreements The Companies Act 1985 and 1989 The Partnership Act 1980 The Business Names Act 1985 Contract, Consumer and Employment Law Standard Forms Of Contract Forming An Agreement Capacity To Contact And Intention To Create Legal Relations Consideration Illegality Duress And Undue Influence Exclusion Clauses Express And Implied Terms Termination Of A Contract Arbitration In Circumstances Of Dispute ...read more.

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