IB Business Management HL 1.2 – Types of Business Entities

Vocabulary flashcards covering key terms and definitions related to public vs private sectors, business ownership structures, social enterprises, cooperatives, and non-profit entities from IB Business Management HL 1.2.

Public Sector

Businesses owned and controlled by government, usually funded through taxation and focused on providing services rather than profit.

Private Sector

Businesses owned and controlled by individuals, entrepreneurs or other firms and funded by owners’ capital, borrowing and retained profits.

Privatisation

The process of transferring ownership of a government-owned enterprise to the private sector, often to improve efficiency or raise funds.

For-Profit Business

A commercial organisation whose primary objective is profit maximisation for its owners or shareholders.

Social Enterprise

A business that pursues social, environmental or cultural objectives while generating revenue; reinvests significant profits into its mission.

Sole Trader

A business owned by one individual who has unlimited liability and retains all profits but carries all risks.

Unlimited Liability

Legal situation where the owner is personally responsible for all business debts, risking personal assets.

Partnership

A business owned by two or more people who share responsibilities, profits and unlimited liability as outlined in a partnership agreement.

Private Limited Company (Ltd)

Incorporated business whose shares are privately sold, offering limited liability to shareholders and requiring Articles of Association.

Limited Liability

Protection whereby shareholders’ financial responsibility for company debts is limited to the amount they invested.

Public Limited Company (PLC)

Incorporated company whose shares are traded on a public stock exchange, enabling large capital raises but subject to greater scrutiny.

Stock Market Flotation (IPO)

The initial public offering of a company’s shares on a stock exchange to raise capital and widen ownership.

Initial Public Offering (IPO)

First sale of a company’s shares to the public; converts a private company into a PLC.

Cooperative

Member-owned social enterprise where each member has one vote; profits are shared or reinvested for members’ benefit.

Employee Cooperative

Cooperative owned and operated by workers who share decision-making and profits equally.

Community Cooperative

Cooperative owned by local community members who contribute time or money; profits reinvested for community benefit.

Retail Cooperative

Group of independent retailers operating under one brand to benefit from shared marketing and increased buying power.

Producer Cooperative

Association of producers (often farmers) who collaborate in production or marketing to share equipment and increase efficiency.

Financial Cooperative (Credit Union)

Member-owned financial institution offering banking services to individuals often underserved by traditional banks, prioritising social aims over profit.

Housing Cooperative

Organisation where residents collectively own and manage housing, providing affordable, socially cohesive dwellings.

For-Profit Social Enterprise

Business that seeks profit while addressing social issues, reinvesting a portion of earnings into its social mission.

Non-Profit Social Enterprise

Organisation using business methods to pursue social/environmental missions without distributing profits to owners.

Non-Governmental Organisation (NGO)

Independent, non-profit body operating locally or internationally to meet social needs, typically financed by donations and grants.

Charity

Legally regulated non-profit entity with a specific public benefit purpose, primarily funded by donations and fundraising activities.

Merit Good

Product or service deemed socially desirable that may be under-provided by the private sector (e.g., education, healthcare).

Managing Director / CEO

Senior executive appointed to run a company and make strategic decisions, especially in private limited companies.

Corporate Governance

System of rules, practices and processes by which a company is directed and controlled, often involving a board of directors.

Liquidity (of shares)

Ease with which company shares can be bought or sold on a market without affecting price significantly.

Surplus

Excess of income over expenditure in non-profit organisations, usually reinvested into achieving the mission.