Types Of Business Organisation (Copy)
1.4 Types of Business Organisation
1.4.1 Forms of Business Organisation
Main Features
| Type | Key Features | Advantages | Disadvantages | Example |
|---|---|---|---|---|
| Sole Trader | One owner, unincorporated | Full control, keeps all profit | Unlimited liability, limited finance | Local shop, freelancer |
| Partnership | 2–20 owners, unincorporated | Shared capital + skills | Unlimited liability, disagreements | Law firms, clinics |
| Private Limited (Ltd) | Shares sold privately, limited liability | Separate legal identity, easier finance | Restricted share transfer, more legal paperwork | IKEA (before expansion) |
| Public Limited (PLC) | Shares sold on stock exchange | Large capital, brand credibility | Risk of takeover, costly regulations | Apple, Toyota |
| Franchise | License to use brand/model | Less risk, brand support | Royalties paid, less freedom | McDonald’s franchise |
| Joint Venture | Two+ firms share project | Share costs/risks, expertise combined | Conflicts, shared profits | Sony Ericsson (past JV) |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Unincorporated vs Incorporated
- Unincorporated (sole trader, partnerships)
- No separate legal identity.
- Owners have unlimited liability.
- Incorporated (Ltd, PLC)
- Separate legal identity.
- Limited liability for shareholders.
Concepts of Risk, Ownership and Liability
- Risk: Higher for unincorporated (personal assets at stake).
- Ownership: Sole traders/partnerships → owner-run; companies → shareholders.
- Limited liability: Shareholders only lose what they invested.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Choosing the Right Form
- Small, low-capital business → Sole trader.
- Shared expertise + capital → Partnership.
- Growth and limited liability → Private Ltd.
- Major expansion + huge finance → PLC.
- Want brand support, low risk → Franchise.
- Large project needing shared resources → Joint venture.
Business Organisations in the Public Sector
- Public Corporations: Owned by government, aim = service not profit.
- Examples: Postal services, railways, utilities in some countries.
- Advantages: Ensure essential services, avoid private monopolies.
- Disadvantages: Less efficiency, risk of political interference.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Quick Recap Keywords
- Sole Trader = 1 owner, unlimited liability
- Partnership = shared ownership, unlimited liability
- Ltd = private, limited liability, shares not public
- PLC = public, shares traded, large finance
- Franchise = use brand/license, royalties paid
- Joint Venture = shared project between firms
- Unincorporated = unlimited liability
- Incorporated = limited liability