There
are several main types of business ownership that you need to be familiar with.
These are summarised below.
| Business Type | Characteristics |
| Sole Trader |
One person takes all the risk (and is responsible for all losses) but keeps
all the profit (if any) for themselves. Unincorporated status means that
the sole trader has unlimited liability. | | Partnership |
Between 1 and 20 people come together to share risk (and losses) but also profits.
This type may mean that a business has access to more capital (and so can grow
faster). There can be an unlimited number of partners in accountancy and
law firm partnerships. Unincorporated status means that partners have unlimited
liability. The laws relating to Partnerships are the Partnership Act 1890
and the Limited Partnership Act 1907. | | Private
Limited Company (Ltd) | At least two people
must be members of a limited company but only one has to be a shareholder. A
sole trader could therefore become 'incorporated' and benefit from the protection
of limited liability (quite often the individual's partner becomes the other person
who must by law act as the Company Secretary). The main law relating to
limited companies is the Companies Act 1985. Private limited companies only
issue shares to a few people (usually family members) and it is not possible to
buy and sell these shares on the Stock Market. This puts a limit on the amount
of capital that can be raised through selling shares. |
| Public Limited Company (Plc) |
The same status as a private limited company with the important difference
that shares can be bought and sold on the stock market. It is possible for
this type of business to raise the most capital because there is no legal limit
to how many shares can be sold to shareholders and held by investors in a public
limited company. | There
are other types of course (for example, Franchises) but these are not covered
here because they will not be examoned at this level of study. Other
types of unincorporated organisation that you need to be familiar with are called
Clubs and Societies. A separet note is needed
regarding the lifting of the veil of incorpration Check 1 or
2 shareholders in limited companies. A Level You
are expected to be able to distinguish between the advantages and disadvantages
of each type of organisation and evaluate each type in respect of these 'pros
and cons'.
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