Types of businesses

• The Main Types of Ownership

  • Sole Traders
  • Partnerships
  • Private Limited Companies (Ltd)
  • Public Limited Companies (PLC)
• Sole Traders, Partnerships, and Limited Companies

  • Easy and inexpensive to set up
  • The owner has complete control over the business
  • All profits belong to the owner
  • Simple tax arrangements
  • Unlimited liability, meaning the owner is personally responsible for any debts the business incurs
  • Limited access to finance and capital
  • Limited skill set of the owner/entrepreneur
  • Shared responsibilities and decision-making
  • More skills and knowledge are available
  • Increased access to finance and capital
  • Potential for disputes between partners
  • Profits are often shared equally, regardless of the contribution
  • Difficult to transfer ownership
  • Limited liability, meaning the owners are not personally responsible for the company's debts
  • Access to greater finance and capital
  • Easier to transfer ownership
  • Can provide a professional image and reputation
  • More expensive and time-consuming to set up
  • More complex legal requirements and regulations than sole traders
  • Annual financial reporting and auditing are required
  • Shareholders have little control over the company as the founder usually imposes their agenda
  • Significant amounts of capital can be raised very quickly
  • The risks associated with ownership are spread among a larger group of shareholders
  • Becoming a PLC raises a company's profile and increase its visibility with customers, suppliers, and potential investors
  • The business is required to adhere to a range of legal and financial regulations which can be costly and time consuming to comply with
  • Selling shares to the public creates many shareholders who will have a say in how the company is run
  • PLCs are expected to deliver consistent growth and profits to their shareholders
• Franchising


  • A ready-made, recognised brand name which will be promoted centrally by the franchisor
  • The franchisor provides training, such as how to make pizzas properly, so as to ensure the quality and brand consistency
  • Suitable suppliers do not need to be sourced as equipment and consistent supplies are provided through the franchisor
  • The franchisor guarantees an exclusive geographical area or market to the franchisee so competition is limited
  • Advice, training, use of software systems are ongoing and the franchisor may also provide loans, insurance and recruitment support
  • The cost to purchase a well-known franchise is likely to be high
  • Core decisions are made by the the franchisor, reducing the business owner's autonomy
  • Royalties linked to the level of sales must be paid regularly, regardless of profit
  • Required materials, supplies or equipment sold by the franchisor may be sold to the franchisee at inflated prices
  • If the franchisee does not follow strict franchise rules or fails to meet quality expectations their franchise rights can be removed
• Joint Ventures


  • Each partner in the joint venture benefits from sharing expertise and resources, such as distribution channels and R&D expertise
  • Joint ventures are less risky than 'going it alone' if entering a new market or diversification
  • Local knowledge can be accessed when one of the joint venture partner companies is already based in the country
  • Costs are shared between joint venture companies, which is very important for expensive projects such as new aircraft
  • If the joint venture is successful, profits have to be shared between the partner businesses
  • Disagreements may occur regarding important decisions due to the input of managers in both businesses
  • The objectives of each business may change over time, leading to a conflict of objectives between joint venture partners
  • If the joint venture fails, it may need to be dismantled, reorganised or sold, which is likely to take significant time and resources
• A franchise is not a form of business ownership - it is an alternative to starting up a brand new business from scratch. In most cases franchisors require businesses to operate as private limited companies as this ownership type is considered to have more stability than sole traders or partnerships
• Disadvantages of joint ventures

  • Each partner benefits from sharing expertise and resources
  • Joint ventures are less risky than 'going it alone'
  • Local knowledge can be accessed
  • Costs are shared
  • If successful, profits have to be shared
  • Disagreements may occur regarding important decisions
  • Objectives of each business may change over time
  • If the joint venture fails, it may need to be dismantled, reorganised or sold
• Unincorporated business


  Does not have a separate legal identity from its owner(s)
• Incorporated business


  Called a company and has a separate legal identity from its owner(s)
• Types of unincorporated businesses

  • Sole traders
  • Partnerships
• Types of incorporated businesses

  • Private limited companies (Ltd)
  • Public limited companies (PLC)
• Factors to consider when deciding on business ownership

  • Type of Ownership
  • Desire for Control & Privacy
  • Financial Considerations
  • The Aims & Stage of the Business Growth
• Business ownership recommendations


  • Sarah wants to set up a new pizza business
  • AMF is a large, fast-growing private limited company
• Governments are likely to retain ownership of organisations in the public sector for several reasons
• Public corporations

  Owned by the government, usually businesses which were once owned by private individuals and have been nationalised
• Advantages of public corporations

  • Government ownership is essential for some crucial or sensitive industries
  • Important public services can be provided
  • Government can choose to nationalise industries that may be in financial trouble
• Disadvantages of public corporations

  • Lack of competition may lead to inefficiency and no incentive to improve
  • Corporations may become complacent or have an unfair advantage over private sector rivals
  • Funding can be cut as a result of political decisions and changes of governments
• In some cases, profit-making companies are partly owned or controlled by the government
• Many services are now being privatised or suffer from insufficient funding due to constraints of government spending