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.