MC

1.2 Types of business entities

Unit 1.2: Types of Business Entities

Topic 1: Introduction to Business Management

Unit Content Overview

  • Assessment Objective

    • Distinction between private and public sectors.

  • Types of Organizations (AO2)

    • Sole traders

    • Partnerships

    • Privately held companies

    • Publicly held companies

  • Types of For-Profit Social Enterprises (AO3)

    • Private sector for-profit social enterprises

    • Public sector for-profit social enterprises

    • Cooperatives

  • Types of Non-Profit Social Enterprises (AO3)

    • Non-governmental organizations (NGOs)

  • Business Management Concepts

    • Porter’s generic strategies

    • STEEPLE analysis

Understanding Sectors

Private vs. Public Sectors

  • Private Sector

    • Owned and controlled by private individuals/businesses.

    • Main objective: Profit generation.

  • Public Sector

    • Owned and controlled by government entities.

    • Main objective: Provide essential goods and services.

Types of Private Sector Business

Categories

  • Unincorporated

    • No legal distinction between owners and the business.

  • Incorporated

    • Legal identity separate from owners.

Liability Structures

Unlimited vs. Limited Liability

  • Unlimited Liability

    • Owners are personally liable for business debts.

  • Limited Liability

    • Owners' financial liability is limited to their investment in the company.

Overview of Business Types

Sole Traders

  • Owned by an individual; simplest form of business ownership.

  • Advantages

    • Few legal formalities, profit retention, personal flexibility.

  • Disadvantages

    • Unlimited liability, limited financial sources, high risk.

Partnerships

  • Owned by two or more partners; at least one must have unlimited liability.

  • Advantages

    • Financial strength, specialization, cost-effective.

  • Disadvantages

    • Unlimited liability, potential for disputes, lack of continuity.

Limited Liability Companies

  • Owned by shareholders with a legal distinction between the company and its owners.

  • Types of Companies

    • Privately held companies (shares not publicly traded)

    • Publicly held companies (shares available on stock exchanges)

Non-Profit Social Enterprises

Non-Governmental Organizations (NGOs)

  • Operate in the private sector, provide goods/services that may be underprovided by the government.

For-Profit Social Enterprises

Characteristics

  • Revenue-generating businesses with social objectives.

  • Aim to make a surplus and use it for societal benefit.

  • Types include private and public sector for-profit social enterprises, and cooperatives.

Case Study: Google

History and Evolution

  • Founded in 1995 by Larry Page and Sergey Brin.

  • Initially started as a partnership; evolved into a publicly held company in 2004.

  • Expansion included various products like Google Maps, Google Earth, etc.

Examination Preparedness

  • Be prepared to discuss business structures using carousel teaching methods.

  • Analyze the advantages and disadvantages of different business types, particularly focusing on privately held and publicly held companies.