Choosing buisness ownership structures

• Choosing the right structure for a business is essential (although you can usually change your mind later)
• Limited liability


  The liability of the owners/shareholders is limited to the amount they have invested in the business
• Unlimited liability


  The liability of the owners/shareholders is unlimited, they are personally responsible for the debts of the business
• Business structures with limited liability

  • Limited companies (Ltd)
  • Public limited companies (PLC)
• Business structures with unlimited liability

  • Sole traders
  • Partnerships
• Control over the business

  Sole traders and private limited companies (Ltd) tend to give an entrepreneur more control than partnerships or PLCs
• Businesses don't have to keep the structure they start off with, the structure can change over time
• Example of a business changing structure

  1. Sole trader forms a partnership

  2. Sole trader or partnership incorporates and may also decide to make shares public
• Example of a business changing structure

  • Morrisons started as a sole trader, then incorporated, then became a public limited company
• Not-for-profit businesses


  Don't try to make a profit (at least, not for their owners), they generate enough income to cover their costs but any surplus is put back into the business or used to fund projects that help the community
• Types of not-for-profit organisations

  • Charities
  • Social enterprises
• Charitable status


  Means not-for-profit organisations get some tax relief and can apply for certain grants, but they can be hard to set up as there are lots of rules they have to follow
• Social enterprises


  Make money by selling products, similar to 'for-profit' businesses but their aims are always centred around using their profits to benefit society in some way
• Challenges of managing not-for-profit firms

  • Uncertainty about how much finance they'll have available
  • Reliance on volunteers rather than permanent members of staff
• Legal structures for not-for-profit firms

  • Unincorporated association
  • Limited by guarantee
• The business world isn't all about people getting rich, some firms are set up just to make the world a better place