A-Level AQA Business Revision Unit 1(Part 7) : Legal Structures - Sole Traders & Partnerships

When a business starts up, they have to decide upon which legal structure they use. These are:

Sole trader - The business is owned, controlled and financed by one individual

Partnership - Owned, controlled and financed by 2 to 22 people

Private Limited Company - Owned, controlled and financed by specially chosen shareholders

Public Limited Company - Any person can buy shares of the business

In this post, we'll be looking specifically at Sole traders & Partnerships.

Being a sole trader involves starting the business on your own, and having to raise finance, conduct market research and employ people by yourself. There are several pros and cons to being a Sole trader:

+ Easy to set up - You work independently and on your own

+Stay in control of the firm - You have unlimited liability

+Keep all the profits - There is no cover if you're ill

+Easy to raise finance

+Personal satisfaction

An additional option, similar to being a sole trader is by forming a partnership. This involves joint ownership of the business. There are several pros and cons to being in a partnership:

+ Extra capital can be raised - The profit is shared

+ Additional skills provided by partners - Unlimited liability

+ A shared workload with partners - Increased chance of disagreements

+Shared unlimited liability between partners - Conflicts during decision-making

+The business' accounts stay private (unpublished)