There are different structures that a business can choose. The most common structure for start ups is a sole trader. If a business wants to have limited liability they will be a LTD
Sole Traders
- A business owned by one person.
- S/he may employ staff.
- Most commonly in the provision of local services.
Advantages
- Easy and cheap to set up.
- Very flexible to changes in circumstances.
- Owner keeps profit.
- Independence.
- More privacy than other firms.
Disadvantages
- Unlimited liability. (Unincorporated).
- High risk and limited security for loans.
- Limited capital.
- Organisational difficulties (holidays/illness).
- Limited skills.
Private Limited Companies (LTD)
- Funded by shares that cannot be advertised for sale without the agreement of the other shareholders.
- This means that second-hand shares cannot be sold on the stock exchange.
- As a result, they are limited in size.
Advantages
- Limited liability.
- More capital than sole trader.
- More privacy than Plc.
- More flexible than Plc.
Disadvantages
- Shares less attractive because they’re difficult to sell.
- Less flexible if expansion needs finance.
- Legal formalities compared to unincorporated firms.
Public Limited Company (PLC)
- Funded by shares.
- Plc’s must issue at least £50,000 of shares, and their shares can be advertised.
- Most try to secure a stock exchange listing their second-hand shares to be bought and sold easily.
Advantages
- Limited liability.
- Easier to raise funds.
- Greater scope for new investment.
- Can use economies of scale.
- Listed on stock exchange = stability.
Disadvantages
- Must publicise performance.
- Greater scrutiny of activities.
- More administration.
- Founders of firm may loose control of ownership.
