Classifying Business - Legal Structure

This refers to the legal status of the business. The legal structure of a business is subject to change over time as a business grows. 

There are factors that influence the choice of legal structure to be covered later.

Key Terms:

Incorporation: The process of creating a business that has a SEPARATE LEGAL ENTITY to its owners; in order to gain limited liability, more finance, protect personal assets, grow the business more rapidly.

Liability: Liability refers to the level of personal responsibility owners have to cover business debts. Unlimited liability; total personal accountability / Limited liability; personal losses limited to invested funds only.

There are four types of legal structure to be covered: