Business structure and liability
Private and public sectors
- The private sector is businesses owned by private people — aim usually profit.
- The public sector is owned by the government (state schools, public hospitals) — aim usually to provide a service.
Legal structures
- sole trader — one owner; easy to set up, keeps all profit, but hard to raise money.
- partnership — 2+ partners share work and profit (often a deed of partnership).
- private limited company (Ltd) — sells shares to a small group; owners are shareholders.
- public limited company (plc) — sells shares to the public on the stock exchange; raises large sums but faces more rules and takeover risk.
- franchise, joint venture, social enterprise are other forms.
Practice
A public limited company (plc) is different from a private limited company because it:
A plc sells shares to the public and can raise large sums, but faces more rules and takeover risk.
Limited vs unlimited liability
- Limited liability — owners can only lose the money they put in (companies).
- Unlimited liability — owners are personally responsible for all debts (sole traders, most partnerships).
- A company is a separate legal identity — it owns things and is sued in its own name.
Practice
Limited liability means the owners:
With limited liability, personal assets are protected; only the invested money is at risk.
Practice
A sole trader has unlimited liability.
Sole traders (and most partnerships) are personally responsible for all the business's debts.
You've got it
Key idea
- private sector = profit; public sector = government service
- forms: sole trader, partnership, Ltd, plc (sells shares publicly), franchise, etc.
- limited liability (companies) protects owners' personal money; unlimited (sole trader) does not