1.2 Types of Business Entities

Private sector

owned by private individuals; aim = profit

Public sector

owned by government; aim = public benefit

Incorporation

separate legal entity from its owners ⟶ limited liability

Unlimited liability

owner pays all business debts ⟶ personal assets at risk

Limited liability

only lose the investment

Dividend

profit paid to shareholders

Sole trader

one owner; unlimited liability

Sole trader: + / −

+ full control, keeps all profit / − limited finance

Partnership

two or more owners; deed of partnership

Partnership: + / −

+ more finance, specialization / − all must agree ⟶ slower decisions

Privately held company

shares not publicly traded

Privately held: + / −

+ owners keep control / − less finance

Publicly held company

shares on a stock exchange

Publicly held: + / −

+ raise large finance / − takeover risk

Social enterprise

commercial activity for a social mission (selling, not relying on donations)

Cooperative

democratically controlled by members; one member, one vote

NGO

non-profit, reinvests surplus in its mission (ex. UNICEF)