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.