Unit 1.2 - Types of Business Entities

Vocabulary flashcards covering key definitions and terms related to types of business entities from Unit 1.2.

Companies (corporations)

Any business organisation that is owned by its shareholders, who have limited liability, comprising privately held companies and publicly held companies.

Cooperatives

For-profit social enterprises owned and run by their members (usually employees, managers or customers) whose primary goal is to create value for their member-owners.

Deed of Partnership

A legally binding contract that all joint owners of a partnership sign, stating the purpose of the business, the formal rights of the partners, and how any profits should be split.

Incorporation (incorporated)

The legal difference between the owners of a company (the shareholders) and the business entity itself, ensuring that the owners are protected by limited liability.

Initial public offering (IPO)

Occurs when an organization sells all or part of its business to shareholders on a public stock exchange for the first time, changing its legal status to a publicly held company.

Limited liability

A legal status of a business that enables its shareholders (business owners) not to be liable for more than the original amount of money invested in the business.

Limited partnership

A special type of partnership where one or more partners contribute capital and enjoy a share of the profits but do not participate in the running of the business, while at least one partner must still have unlimited liability.

Non-governmental organizations (NGOs)

A type of non-profit organization (NPO) operating in the private sector of the economy for the benefit of others in society (rather than for shareholders).

Partnership

A business alliance consisting of between 2 and 20 individual owners who are jointly responsible for the business (although this number can vary between countries).

Private sector

The section of the economy made up of businesses that are owned by individuals or groups of individuals, rather than by the government.

Privately held company

A business owned by shareholders with limited liability, whose shares cannot be traded on a public Stock Exchange.

Publicly held company

A joint-stock company owned by shareholders whose shares can be bought and sold by the general public, without prior approval of existing owners.

Public sector

Businesses in this section of the economy are run and owned by the government in order to provide essential services for society as a whole, e.g., education and healthcare services.

Sleeping partner

Also known as a silent partner, an investor in a partnership who does not get involved in the daily running and management of the organization.

Social enterprises

Revenue-generating businesses with community (social) objectives at the core of their operations in order to benefit the general public, rather than private shareholders.

Sole trader (sole proprietor)

An organization which is owned by a single entrepreneur who has exclusive responsibility for the running of the business.

Stock exchange

Any marketplace where the general public and other companies can buy and/or sell shares.

Unlimited liability

Means the owner(s) of a business (such as a sole trader or partner) is personally liable for any business debts, even if this requires the debts to be settled by selling off personal assets.