Ownership and Purpose

Ownership and Purpose

Key Concepts

  • Business Ownership is essentially who owns a business. It could be one person (sole traders), two or more people (partnerships), or a large number of shareholder owners (corporations).
  • The Purpose of a business refers to the reason why the business exists, which may be to generate profit or serve a particular social cause among others.

Different Types of Ownership

Sole Traders

  • A business owned and operated by one person.
  • The owner has unlimited liability, which means they are personally liable for all the business’s debts.
  • It is easy to set up but raising finance may be difficult as lenders may perceive as high risk.

Partnerships

  • Owned by 2 to 20 people.
  • Each partner contributes resources (money, skills, property) and shares in the profits and losses.
  • Partners have unlimited liability.

Private Limited Companies (Ltd)

  • Owned by up to 50 shareholders who have limited liability.
  • The company is legally separate from its owners.
  • Shares cannot be sold to the general public.

Public Limited Companies (PLC)

  • Owned by shareholders who bought shares on the stock market.
  • The company is legally separate from its owners.
  • Shareholders have limited liability.
  • It is easier for such companies to raise funds, but they are subject to more regulation.

Business Purpose

For-Profit Organisations

  • These businesses primarily seek to generate profit, which is either reinvested into the business or distributed to owners/shareholders.
  • Examples include sole traders, partnerships and corporations.

Non-Profit Organisations

  • Non-profit organisations operate to fulfill a social or community purpose.
  • Any income after costs is usually reinvested to further the cause of the organisation.
  • Examples include charities and voluntary organisations.

Public Sector Organisations

  • These are owned and operated by the government.
  • They usually provide essential public services, such as health care, education, and transport.
  • Their purpose is not to generate profit, but to serve the needs of the public.

Mutuals or Cooperatives

  • Owned and run by their members, such as workers or customers.
  • The purpose is not solely to generate profit, but to serve the interests of their members.
  • Any profit is usually distributed among the members or reinvested into the business.