AQA · GCSE · Business
Course version: 8132 · Version from Sept 2017
Analyse the benefits and drawbacks of each legal structure (including…
Full specification wording
Business ownership: analyse the benefits and drawbacks of each legal structure (including issues such as management and control, sources of finance available, liability and distribution of profits)
Every legal structure carries trade-offs.
Checked against the AQA 8132 specification (opens in a new tab) on .
- Point 7 of 9
- 4 key terms
Study notes
From the checked teaching notes for this specification point.
The idea
Every legal structure carries trade-offs. A sole trader keeps all control and profit but faces unlimited liability and limited finance. A partnership adds capital and shared skills yet profits and decisions are shared, and ordinary partners still risk personal assets. A private limited company (Ltd) gains limited liability and can sell shares privately, but must register, publish accounts and accept some loss of control. A public limited company (PLC) can raise large sums through the stock market, though it faces regulation, disclosure and possible loss of control. Assess each structure against management and control, finance, liability and profit distribution, then judge which best fits the business's needs.
What earns the marks
- Explains how management and control differ: sole traders decide alone, partners share decisions, and companies are run by directors accountable to shareholders.
- Analyses sources of finance: sole traders rely on personal savings, loans and retained profit; partnerships pool capital; Ltds and PLCs can issue shares, with PLCs able to raise larger sums via the stock market.
- Explains liability: sole traders and ordinary partners have unlimited liability, while shareholders in a Ltd or PLC have limited liability.
- Analyses distribution of profits: sole traders and partners keep or share profits directly, whereas companies pay dividends to shareholders and retain some profit.
- Reaches a supported judgement linking the chosen structure to the business's size, risk and growth ambitions.
Common mistakes and how to put them right
Assuming all partners have limited liability.
Put it right: In an ordinary partnership they do not, though a limited liability partnership does.
Confusing a private limited company with a public limited company.
Put it right: Only a PLC can offer shares to the general public on a stock exchange.
Treating limited liability as protection for the business itself.
Put it right: It protects the owners' personal assets, not the company from debts.
Exam tips
- Use the case study's context, such as the owner's need for control or capital, to justify your analysis rather than listing generic points.
- Structure each paragraph around one issue, for example liability, then state the benefit and drawback for the business in question.
- Finish with a clear judgement that weighs the most important factor for that specific business.
Try the lesson
The start of the Business ownership: analyse the benefits and drawbacks of each legal structure (including issues such as management and control, sources of finance available, liability and distribution of profits) lesson, made from checked teaching notes for this specification point.
Have a go first
Which legal structure gives its owners the widest choice of sources of finance, such as selling shares on the stock market?
Listen
Every legal structure carries trade-offs. A sole trader keeps all control and profit but faces unlimited liability and limited finance. A partnership adds capital and shared skills yet profits and decisions are shared, and ordinary partners still risk personal assets. A private limited company (Ltd) gains limited liability and can sell shares privately, but must register, publish accounts and accept some loss of control. A public limited company (PLC) can raise large sums through the stock market, though it faces regulation, disclosure and possible loss of control. Assess each structure against management and control, finance, liability and profit distribution, then judge which best fits the business's needs. A strong answer earns marks for these points. Explains how management and control differ: sole traders decide alone, partners share decisions, and companies are run by directors accountable to shareholders. Analyses sources of finance: sole traders rely on personal savings, loans and retained profit; partnerships pool capital; Ltds and PLCs can issue shares, with PLCs able to raise larger sums via the stock market. Explains liability: sole traders and ordinary partners have unlimited liability, while shareholders in a Ltd or PLC have limited liability. Analyses distribution of profits: sole traders and partners keep or share profits directly, whereas companies pay dividends to shareholders and retain some profit. Exam tip: Use the case study's context, such as the owner's need for control or capital, to justify your analysis rather than listing generic points.
See it
Key words
Say what each word means before you turn the card.
Ownership and control
Try answering aloud or in your head before turning the card.
Sources of finance
Try answering aloud or in your head before turning the card.
Liability
Try answering aloud or in your head before turning the card.
Profit distribution
Try answering aloud or in your head before turning the card.
See every definition
- Ownership and control
- Sole traders decide alone, partners share decisions, and companies are run by directors accountable to shareholders.
- Sources of finance
- Sole traders rely on personal savings, loans and retained profit; partnerships pool capital; Ltds and PLCs can issue shares, with PLCs able to raise larger sums via the stock market.
- Liability
- Sole traders and ordinary partners have unlimited liability, while shareholders in a Ltd or PLC have limited liability.
- Profit distribution
- Sole traders and partners keep or share profits directly, whereas companies pay dividends to shareholders and retain some profit.
Label the diagram
Some boxes have lost their names. Pick the right name for each number.
1Box 1
2Box 2
3Box 3
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