BUSSINESS STUDIES

TYPES OF BUSINESS ORGANISATIONS

Sole Trader / Sole Proprietor

A business owned and controlled by one person.

• Advantages: Easy to set up, owner has complete control, keeps all profits, and keeps business affairs private.

• Disadvantages: Unlimited liability, limited sources of finance, and lack of continuity.

Partnership

A business formed by 2 to 20 people who share ownership, responsibilities, and profits.

• Advantages: Shared workload, more capital injected, and shared risks.

• Disadvantages: Unlimited liability, shared profits, and disagreements between partners.

Private Limited Company (Ltd):

An incorporated business where shares can only be sold to family and invited shareholders, not the general public.

• Advantages: Limited liability, the business continues even if an owner leaves (continuity), and owners maintain control.

• Disadvantages: More complex and expensive to set up, and shares cannot be sold on the open stock market.

Public Limited Company

An incorporated business that can sell shares to the general public on the stock market.

• Advantages: Huge potential to raise finance (capital), limited liability, and easy transfer of shares.

• Disadvantages: Strict legal requirements to publish financial accounts, risk of a hostile takeover, and potential conflict between shareholders and directors.

Unlimited Liability

• The owners of the business are personally responsible for all business debts; personal assets can be seized to pay off liabilities.

Limited Liability

Shareholders are only liable for the amount of money they invested; personal assets are protected.

Franchise

A business model where a franchisee buys a license to trade under an established brand name (franchisor).

Joint Venture

An agreement between two or more businesses to work together on a specific project, sharing costs, risks, and profits.

Public Corporations:

Businesses owned and run by the central or local government (e.g., nationalized railways or water supplies).