Legal Structure- Classification of a business
Public Company
1 to unlimited number of shareholders No limit on raising funds through share offers No limit to transfer shares Name offering limited liability LTD
Sole Trader
A business owned and operated by a single individual and regarded as the same legal entity? UNINCORPORATED
Partnership
A business owned and operated by between 2 and 20 people and regarded as the same legal entity. UNINCORPORATED.
Company
All companies are INCORPORATED and have gone through the process of incorporation. Business and owners Regarded as SEPARATE LEGAL ENTITY.
Advantages- Company
Easier to attract public finance Limited liability Easy transfer of ownership Greater spread if risk Growth potential Tax rate lower than personal income tax rate Experienced management-Board do directors
Advantages- Sole Trader
Low start up costs Simplest form Less government regulations Complete control Low operation cost No tax on profits (only on personal income)
Private Company
Most common type of company structure 2-50 shareholders Offers limited liability- PTY LTD Small to medium owned enterprises Only sell with approval from directors
Disadvantages- Company
Possible limited liability Double taxation Start up cost is high Must publish an annual report of audited accounts If to large, results insufficiencies Public disclosure
Disadvantages- Sole Trader
Unlimited liability Burden of management Difficult to operate if sick Business ends if owner dies Carry all losses Difficult raising finance for expansion
Disadvantages- Partnership
Unlimited liability Difficulty in finding a partner Possibility of dispute Liability for all debts (including partners) Divided loyalty and authority
