Types of business ownership UNIT 1 TYPES OF BUSINESS OWNERSHIP Types of business ownership

There are two main sectors of business in the UK: public private Public sector organisations are run by the government for people, e.g. the Inland Revenue or NHS. Private sector organisations are run for profit or not-for-profit purposes.

Profit-making organisations are divided into four main types: sole trader partnership company franchise

Sole trader: the most common form of business ownership: owned by one person but may employ a number of people unlimited liability

Partnership: Business associations with two or more members, usually up to 20: unlimited liability for the partners, unless limited liability status is written into the partnership as a result of the Partnerships Act 2002 often used by professional people, e.g. accountants or solicitors

Companies are divided into two types: public limited company, known as PLC private limited company known as LTD

PLC Public limited companies issue shares that can be bought by the public. Shares are traded on the stock exchange and shareholders are entitled to a share of the profits, called a dividend. Limited liability means that the shareholders are liable only for the amount of money they invest in a business.

LTD Private limited companies issue shares to private investors with the permission of the board of directors. Limited liability means that the shareholders are liable only for the amount of money invested in the business.

Franchise A franchise is not a form of business ownership but a ‘business marriage’ between a proven business (franchisor) and a person wishing to run a business with support (franchisee). The franchisee buys the permission to run the business from the franchisor. The franchisee will have a form of business ownership such as sole trader, partnership or limited company.

Not-for-profit organisations aim to provide a service rather than make a profit – many are charities new laws require charities to meet one of a number of objectives in order to qualify for their status, such as: prevention and relief of poverty (e.g. Oxfam) advancement of religion (e.g. Church of England) advancement of education (e.g. The British Dyslexia Association)