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For example, a building contractor’s business that takes on a project is likely to be liable for any client losses suffered as a result of a breach of contract. If the contractor operates as a sole trader then the person himself will be liable, and such liability could bankrupt most individuals. On the other hand sole traders are their own boss and do not need to share their profits with anyone. On the other hand, a private limited company offers a great deal of protection from risk, as long as the owners of the company do not use the company for fraudulent activities. A limited company, legally speaking, has a personality of its own. It is owned by its shareholders and run by its directors (often, these are the same individuals), but it enters into contracts in its own right. This means that any risks the business takes on are associated with the company, and not the individuals behind it. To use the same situation as above, if the contractor incorporates and trades as a private limited company, the risks associated with a breach of contract will be limited to the company. If the liability is too high and the company does not have enough funds to meet it, the company may become insolvent, but the shareholders liability is limited to the amount of money initially invested. This is important for creditors to know when dealing with a company, and is the reason that every private limited company’s name must end with the word ‘limited’ or the letters ‘Ltd’. A public limited company (or PLC) is at its heart the same as a private company, save for the fact that it is permitted to offer its shares to the public, and is therefore also governed by stricter rules. A company and commercial solicitor can provide legal advice to a business regarding whether they should incorporate as a private limited company or a public limited company. The remaining business structure is less common. A partnership is a structure which requires little to no formalities to set up and was originally designed to ensure that sole traders working together are appropriately defined in law. Recently partnership law was significantly changed with the introduction of the Limited Liability Partnership (or LLP), a business structure which incorporates the limited liability of companies and the organisational structure of a partnership. For further legal advice on the different business structures, it is advisable to contact a company and commercial solicitor. A company and commercial solicitor can apply the advantages and disadvantages of the different structures to individual businesses. In addition, a company and commercial solicitor can then assist with the set up of the business.
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