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
Arigatō
Danke shōn
Merci
Nasì