Chapter 3 The Legal Function

Abstract

When we look at business, we generally focus on large global businesses, such as Apple, Shell or Rolls Royce. While there are around 5.2 million businesses in the UK, in fact 99% of them are extremely small (HM Government, 2014). Despite the rate of business failure being high in the early years, overall numbers of businesses are slowly growing. Most new businesses start small, with a view to expansion. This narrows the choice of business medium, as some forms may not suit a particular business at its current stage of development. The focus of this chapter is on the legal structures for doing business. It adopts terminology from the UK’s legal system, but similar structures apply in other countries. The objective is to show when a particular legal structure might be appropriate and to highlight key differences between legal structures for enterprises. We also examine the concept of legal personality, which allows a business to be considered as a separate entity from its members, and allows the members of some organizations to have limited liability for business obligations. Most countries have some business forms where the proprietors carry unlimited liability and others where they can avail themselves of limited liability.