Types of business organisation
Introduced| English | Meaning |
|---|---|
| liable/ˈlaɪəbl/ | Legally responsible for an obligation, debt or consequence. |
| sole trader/səʊl ˈtreɪdə/ | A business owned and operated by one person, usually without a legal separation between the owner and the business. |
| partnership/ˈpɑːtnəʃɪp/ | A business owned by two or more people who share its management, profits and responsibilities under an agreement. |
| unlimited liability/ʌnˈlɪmɪtɪd ˌlaɪəˈbɪlɪti/ | The owner's legal responsibility for business debts without a fixed limit, potentially putting personal assets at risk. |
| private limited company/ˈpraɪvət ˈlɪmɪtɪd ˈkʌmpəni/ | An incorporated business whose owners have limited liability and whose shares are not offered to the general public. |
| public limited company/ˈpʌblɪk ˈlɪmɪtɪd ˈkʌmpəni/ | A company with limited shareholder liability whose legal form permits shares to be offered to the public, subject to applicable rules. |
| shareholders/ˈʃeəhəʊldəz/ | People or organisations that own shares in a company. |
| limited liability/ˈlɪmɪtɪd ˌlaɪəˈbɪlɪti/ | A legal arrangement limiting owners' responsibility for business debts to their investment or another specified amount. |
| creditors/ˈkredɪtəz/ | creditors |
Who owns the business?
- A one-person market stall and a global company are owned in completely different ways.
- The type of business organisation decides who owns it and who is liable 负有责任 for its debts.
Choose the ownership form
Compare ownership, control and liability in real business types.
A sole trader has:
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A sole trader is personally liable for all debts.
A partnership has two or more owners who share the capital and risk.
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Partners share ownership, profit and (usually) unlimited liability.
When owners risk their personal possessions for business debts, they have ______ liability.
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Sole traders and partnerships usually have unlimited liability.
Sole trader 独资企业 and partnership 合伙企业
- Sole trader: one owner. Easy to set up, keeps all profit — but unlimited liability 无限责任.
- Partnership: 2+ owners share capital, work and risk; usually still unlimited liability.
Business types split by liability into unincorporated and incorporated
Limited liability means shareholders can lose:
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Their loss is capped at their investment.
An advantage of becoming a limited company is:
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Limited liability protects owners' personal assets.
Limited companies
- Private limited company 私人有限公司 (Ltd) and public limited company 公众有限公司 (plc) are owned by shareholders 股东.
- They have limited liability 有限责任: owners can lose only what they invested.
Businesses make goods and services to meet people's needs and wants
Comparing them
- Sole trader/partnership: simple and private, but risky (unlimited liability), hard to raise finance.
- Companies: can raise more finance and protect owners, but face more rules and shared control.
Unlimited liability puts personal assets at risk. If a sole trader's business fails, creditors 债权人 can take the owner's personal possessions. A shareholder in a limited company cannot lose more than they invested.
You've got it
- sole trader (one owner) and partnership (a few) — usually unlimited liability
- Ltd and plc are owned by shareholders with limited liability
- companies raise more finance and limit risk, but face more rules