Evaluate which legal structure would be most appropriate for a variety of…

The idea

You must judge the best legal structure for different businesses, including new start-ups and large established firms. Consider sole trader, partnership, private limited company (Ltd) and public limited company (plc). Weigh control, liability, finance, continuity and cost. For a new start-up, a sole trader may suit low-risk, low-cost ventures, but a partnership can share skills and capital. A large established business may need a Ltd or plc to raise finance and limit liability, though plc brings disclosure and takeover risk. Reach a supported judgement for each example.

What earns the marks

• Identifies and describes at least two legal structures, such as sole trader, partnership, private limited company (Ltd) and public limited company (plc), using correct business terminology.
• Explains advantages and disadvantages of each structure in context, for example unlimited liability for a sole trader, shared decision-making in a partnership, or ability to sell shares for a plc.
• Applies the structures to a new start-up business, considering factors such as limited finance, owner control, risk and ease of set-up.
• Applies the structures to a large established business, considering factors such as raising capital, limited liability, continuity and public scrutiny.
• Reaches a justified conclusion that compares structures and selects the most appropriate one for each example, using evidence from the context.

Common mistakes and how to put them right

• Listing structures without linking them to the business example.

  Put it right: Apply each structure to the specific start-up or established business and explain why it fits or does not fit.

• Confusing unlimited liability with limited liability.

  Put it right: State clearly that sole traders and ordinary partners have unlimited liability, while shareholders in a Ltd or plc have limited liability.

• Assuming a plc is always best because it can raise the most finance.

  Put it right: Weigh drawbacks such as loss of control, disclosure requirements and cost of incorporation before judging.

• Ignoring the new start-up context and recommending a plc.

  Put it right: Consider that a new start-up may lack the trading record, finance and scale needed for a plc.

Exam tips

• Use the business context in every paragraph: name the example and link each advantage or disadvantage directly to it.
• Structure your answer around a clear judgement: compare at least two structures, then state which is most appropriate and why.
• Include a counter-argument or limitation to show evaluation, for example why a partnership might still fail despite shared capital.
• Keep your conclusion decisive: avoid sitting on the fence and avoid repeating earlier points without adding judgement.