Types of business organisations

Entrepreneurs

Organize and manage resources in firms to make goods and services

Owners liability

The financial responsibility of an entrepreneur

Unlimited liability

When an owner must repay any business debts even if it means using their savings or property

Limited liability

When owners have a separate legal identity and are not responsible for business debts

Sole traders

A business owned and controlled by one person

Advantages of being a sole trader

Can choose hours of work

Receive all profits

Easy to set up

Disadvantages of being a sole trader

Have full responsibility

May lose revenue if sick or on holiday

Lacks capital for business growth

Partnership

Legal agreement between two or more people to own and run a business

Advantages of a partnership

More partners means more capital

Partners bring more ideas

Limited liability

Share responsibility

Disadvantages of a partnership

Share profits

Can be unlimited liabilities

Partners may lack capital

Joint-stock company

A company where ownership is divided into shares

Private limited company

Company owner by shareholders whose shares are not available to the public

Advantages of a private limited company

Shareholders have limited liability

Shareholders receive dividends

Used to seek additional finance

Disadvantages of private limited company

Directors may ignore the interests of shareholders

Financial information may have to be disclosed

Public limited company

Company owned by shareholders whose shares are available to the public

Advantages of public limited companies

Shares can be advertised on the stock market

Shareholders have limited liability

Disadvantages of public limited companies

Legal costs of set up can be high

Annual financial accounts must be published

Owner may lose control of the company by another company through the purchase of stocks

Multinational

Is a firm that operates in more than one country but will usually have its headquarters based in its country of origin

Features of multinationals

Can minimise transport cost by locating plants across different countries

Can raise capital for specialised employees and development

Can minimise costs by operating in low wage economies

Economic benefits for host economies of multinationals

Provides jobs and incomes

Brings knowledge

Pays taxes

Economic costs for host economies of multinationals

Can transfer profits to another country to avoid taxes

May force local competition out of business

May use power to secure subsidies

Cooperative

Owner by its members for mutual benefit

Worker cooperative features

Workers own all shares

Workers share any profits

Retail cooperative features

Owned by its members

Members receive profits