Types of Business Organisation

IGCSE Business Studies
2.1.2 Types of Business Organisation

Learning Outcomes
• Describe the main features of sole traders, partnerships,
limited companies
• Understanding the differences between sole traders and
partnerships
• Understand the differences between unincorporated businesses
and limited companies
• Recommend suitable forms of business organisation to the
owners and managers in a given situation
Reminder……Types of Organisations
Ownership Types
Private Sector Public Sector
Profit
Non-Profit
Incorporated • Public
Unincorporated • Charities
Corporations
•Private Limited • Trade Unions
•Sole Trader
Company • NGOs • Public Services
•Partnership • Social
•Public Limited • Local
Organisations
Company Authorities
• Advocacy Orgs
Incorporation….. What does it
mean?
• Incorporation is the forming of a new corporation (a
corporation being a legal entity that is effectively recognised
as a person under the law).
The Process of Incorporation
Legal Benefits Protection of
Option to raise personal
funds by assets (Limited
selling shares Liability)
Company can
have a bank Continuity
account (ownership can
be transferred)
Company has a
separate credit
rating Profits taxed at
corporate rates
Why would each of these be useful?

Obligations of Incorporated
Businesses
• To have at least one shareholder and at least one director
• To inform if there are any changes to the details of the
company
• File company accounts and company tax return yearly
• To keep detailed financial records for at least 6 years after
each financial year (or be fined)
• To file an annual return each year (currently costs £40)
Incorporate
d
V
Let’s assume the business has decided against incorporation..
UNINCORPORATED
BUSINESSES
Your options…..
If you want to own a business on your
own you will be a SOLE TRADER
If you want to own a business with

other people you will be a
PARTNERSHIP
Owners of these types of business have

UNLIMITED LIABILITY
Task…. 5 mins
• In pairs discuss and write 2 lists.
Reasons why someone would prefer to set up a business on their

own….
Reasons why someone would prefer to set up a business with

other people….
The benefits of being
unincorporated
• Very easy to set up
• Register as being self employed and you’re good to go
• None of the paperwork and associated costs of setting up as a
company
Rules of Partnerships….
• Can have 2-20 owners
• At least 1 partner must have
UNLIMITED LIABILITY
• Has the option of drawing up a DEED OF
PARTNERSHIP
Question….
• Why should someone be
extremely cautious when
entering into a partnership?
Homework Task
Construct a Deed of Partnership for the business including the
following sections:
•name of the business and details of its activities
•names of partners and their duties and responsibilities (give
reasons)
•amount of capital provided by each partner
•how the profits and losses will be shared out
•explanation of how decisions will be made and any voting rights
•arrangement for retirement, death or change of partners
•Your challenge is to be interesting, not realistic!
Incorporate
d
V
Let’s assume the answer is YES!
INCORPORATED BUSINESSES
Types of Companies
As a new business you could be a
PRIVATE LIMITED COMPANY (LTD)
Later on you may decide to become a

PUBLIC LIMITED COMPANY
Limited Companies
• Are Incorporated
• Have Shareholders rather than owners
• May have from 1 up to thousands of
Shareholders
• Have a Board of Directors
Task – 5 mins
• Using your textbook and/or the internet
• Find out the differences between Private Limited Companies

and Public Limited Companies
BECOMING A PUBLIC
LIMITED COMPANY
Key Questions…..
• Why would a Private Limited Company want to become a
Public Limited Company?
• Can any Ltd become a Plc?
• What process would they have to go through to become one?
• Are there any cons of being a Public Limited Company (as
opposed to remaining a Ltd?)
A word from the lovely Richard
Branson
Fortunately we're not a public
company - we're a private
group of companies, and I can
do what I want.
What does he
mean by this?
Task – Dell Delisting
• Open and read the article “Dell wins back his company’
• Answer the following questions....
• What is meant by the term delist?

• Why have Dell and their competitors struggled in recent
years?
• How does Michael Dell plan to turn the company around?
• Why does Michael Dell want to delist?
• Why is there opposition to the delisting?
Task - Double Bubbles
• Complete the double bubble diagram comparing Sole traders
and Partnerships
Homework: Complete the other two double bubble diagrams

Sole Partnership
Trader
Partnership Private
Limited
Company
Private Limited Public Limited
Company Company
CHOOSING AND
RECOMMENDING A BUSINESS
STRUCTURE
• http://topics.nytimes.com/top/news/business/small-business/ca
se-studies/index.html

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IGCSE Business Studies

2.1.2 Types of Business Organisation

Private Sector Public Sector

Why would each of these be useful?

Let’s assume the business has decided against incorporation..

If you want to own a business with

Owners of these types of business have

Reasons why someone would prefer to set up a business on their

Reasons why someone would prefer to set up a business with

Let’s assume the answer is YES!

Later on you may decide to become a

• Find out the differences between Private Limited Companies

• What is meant by the term delist?

Homework: Complete the other two double bubble diagrams

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