DP Business Management 1.2 Key Terms

Companies (corporations)

This refers to any business organisation that is owned by its shareholders, who have limited liability. They comprise of privately held companies and publicly held companies.

Cooperatives

These are for-profit social enterprises owned and run by their members (usually employees, managers or customers). Their 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)

This means that there is a legal difference between the owners of a company (the shareholders) and the business entity itself. This ensures that the owners are protected by limited liability.

Initial public offering (IPO)

An IPO occurs when an organization sells all or part of its business to shareholders on a public stock exchange for the first time. This changes the legal status of the business to a publicly held company.

Limited liability

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

Limited partnership

This is 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. However, 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

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

Privately held company

This is a business owned by shareholders with limited liability, but the shares cannot be traded on a public Stock Exchange.

Publicly held company

A joint-stock company owned by shareholders. The shares in a publicly held company 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, this is an investor in a partnership but who does not get involved in the daily running and management of the organization.

Social enterprises

These organizations are 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

This is any marketplace where the general public and other companies can buy and/or sell shares.

Unlimited liability

This 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.