Unit 1.2

Businesses can be categorised into

private or public sector organizations

Private and public depends on

Their main business objective. 

who owns them

Most businesses are in the

private sector

Private/Public: Their main

business objective. 

Private/Public: Most businesses are in

the private sector. 

Private Sectors

Organizations owned and controlled by private individuals and businesses. 

Private:  Main aim -

to make profit. 

Public   Sectors

Organizations owned and controlled by the government. 

Public  Main aim -

 

to provide essential goods and services. 

Profit-based organisations 

These are revenue generating businesses with profit objectives at the core of their operations. 

Profit Based Organizations’ goals are to: 

Make a profit. 

Reward the owners with profits from the business. 

Return some of the profits back into the business for capital growth. 

Profit-based: Make

a profit. 

Profit-based: Reward the owners with

profits from the business. 

Profit-based: Return some of the profits back

into the business for capital growth. 

When deciding on which type of organization to set up, an entrepreneur needs to

consider whether or not to incorporate the business to benefit from limited liability

sole trader

These businesses are owned by individuals who own and run a personal business. 

sole trader is the

most common type of business ownership as it is relatively easy to set up. 

for sole traders Start-up capital is

usually obtained from personal

savings and borrowing. 

Sole traders have

unlimited liability. 

sole trader advantages

^{Few legal formalities}  

^{Profit taking}  

^{Being your own boss}  

^{Personalised service}  

^Privacy  

^{Quicker decision-making} 

sole trader advantages: Few 

legal formalities  

sole trader advantages: Profit

taking  

sole trader advantages: Being your

own boss

sole trader advantages: personal

services

sole trader advantages: privacy

privacy

sole trader advantages: quicker

decision making

sole trader disadvantages: unlimited

liability

sole trader disadvantages: limited sources of

finanace

sole trader disadvantages:high

risks

sole trader disadvantages: workload and

stress

sole trader disadvantages: limited economies

of scale

sole trader disadvantages: lack of

continuity

Partner disadvantages: Prolonged

decision-making 

partnership disadvantages: Lack of harmony due to

disputes/disagreements 

Partnerships are owned by

two or more persons (known as partners).

At least one partner must

have unlimited liability.

Start-up finance is raised mostly by

personal funds which are pooled together by the partners.

A legal document known as a deed of partnership is

drawn up to formalise agreements such as how profits and losses are to be shared between partners.

Partnership Advantages

•Financial strength

•Specialisation and division of labour

•Financial privacy

•Cost-effective

Partnership Advantages: Financial

strength

Partnership Advantages: Specialisation and

division of labour

Partnership Advantages •Financial

privacy

Partnership Advantages: Cost-

effective

Partnership Disadvantages:

•Unlimited liability

•A lack of continuity

•Prolonged decision-making

•Lack of harmony due to disputes/disagreements

Partnership Disadvantages: •Unlimited

liability

Partnership Disadvantages: •A lack of

continuity

Partnership Disadvantages:Prolonged

decision-making

Partnership Disadvantages: •Lack of harmony due to

disputes/disagreements

Limited Liability companies 

These are businesses owned by their shareholders. 

Limited Liability companies: Shareholders have invested money to

provide capital

for a company. 

Limited Liability companies: Companies are

incorporated businesses.  

In the eyes of the law, the companies are treated as a

 legal entity separate from its owners. 

This means they have limited liability. 

There are two types of companies –

private held and publicly held companies. 

A privately held company’s shares are

owned by friends and/or family.  

Private: These shares cannot be

traded publicly on the stock exchange. 

Shareholders can only sell their shares if

they have prior permission from other shareholders. 

Typically, privately held companies are also

family businesses. 

Private Company Examples

Eg: Mars, Aldi, and IKEA are all family businesses incorporated into privately held companies 

A publicly held company can

sell shares on the stock exchange. 

Public: Shares are held by

the general public. 

Public: No prior permission by other shareholders is 

required for a shareholder to sell their shares. 

Public Examples

 

Eg: Honda Motor Company, Ltd., The Walt Disney Company, and Facebook Inc. (Meta) are all publicly held companies. 

Limited Liability Advantages:

Raising finance 

Limited liability 

Continuity 

Economies of scale 

Productivity 

Tax benefits 

 

Limited Liability Advantages: Raising

finance 

Limited Liability Advantages: Limited

liability 

Limited Liability Advantages: : Continuity 

Continuity 

Limited Liability Advantages: Economies

of scale 

Limited Liability Advantages: Productivity 

Productivity 

Limited Liability Advantages: Tax

benefits 

Limited Liability Disadvantages

Disadvantages 

Communication problems 

Added complexities 

Compliance costs 

Disclosure of information 

Bureaucracy 

Loss of control 

 

Limited Liability Disadvantages: Communication

problems 

Limited Liability Disadvantages: Added

complexities 

Limited Liability Disadvantages:

Compliance

costs 

Limited Liability Disadvantages: Disclosure of

information 

Limited Liability Disadvantages: Bureaucracy 

excessively complicated administrative procedure.

Limited Liability Disadvantages: Loss of

 

control