Unit 1 - Chapter 2: Types of Business Entities

Economic systems

A nation's system for allocating its resources among its citizens, both individuals and organizations

Command/Planned Economy

Economics resources are owned, planned, and controlled by the states

Free market economy

Economic resources are owned largely by the private sector, with very little state intervention

Mixed economy

Economics resources are owned and controlled by both private and public sectors

Public Sector

Comprises organizations accountable to and controlled by central or local government (the state)

Private sector

Comprises businesses owned and controlled by individuals or groups of individuals

Privatization

The sale of public sector organizations to the private sector

Sole trader/proprietor

A business that is exclusively owned by one person who has full control of it and is entitled to all the profit (after tax)

Partnerships

Business formed by two or more people to carry on a business together with shared capital investment and, usually, shared responsibilities

Limited Liability

The only liability, or potential loss, a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder

Private (LTD)

privately held company, A small to medium-sized business that is owned by shareholders who are often members of the same family

Public (PLC)

publicly held company, A limited company, often a large business, with the legal right to sell shares to the general public, its share price is quoted on the national stock exchange

Cooperatives

Group of people acting together to meet the common needs and aspirations of its members, sharing ownership and making decisions democratically

Legal personality

separate from owners

Continuity

exists after death of owners

Share

A certificate confirming part ownership of a company. Most types of shares entitle shareholders to dividends paid from profits

Initial public offering (IPO)

The process of offering for sale the shares of a privately held company to financial institutions and the general public

Shareholders

Individuals or institutions that buy/own shares in a limited company

Social Enterprises

Business with mainly social and/or environmental objectives that reinvests most of its profits into benefiting society rather than maximizing returns to owners. NOT A LEGAL STRUCTURE. NOT A CHARITY.

Social entrepreneur

A person who establishes an enterprise with the aim of solving social problems or achieving social change

Triple bottom line

the three objectives of social enterprises

Charity

an organization set up to raise money to help people in need or to support causes that require funding

Non-Profit Organization (Non-Profit Social Enterprises)

Any organization that has aims other than making and distributing profit which is usually governed by a voluntary board

Non-governmental organization (NGOs)

A legally constituted body that functions independently of any government and that has a specific aim and purpose