Types of Business Ownership
The main ways a business can be owned: sole trader, partnership, private and public limited companies, and not-for-profit, plus the key idea of limited liability.
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Who owns a business?
Businesses can be owned in different ways, each with its own rules on control, finance, profit and risk. This module covers the main legal structures, from a sole trader with one owner to a public limited company with many shareholders, and the important idea of limited liability.
Words for ownership
Learn these four terms before you compare the structures.
Unlimited and limited liability
Liability decides how much an owner can lose if the business fails.
Fit the ownership to the business
To reach the top grades, choose the ownership type that fits the specific business, such as a sole trader for a small start-up or a plc for a large firm that needs lots of finance, rather than giving a generic comparison.
Match the structure to its description
- sole trader
- partnership
- private limited company
- not-for-profit
- one owner who keeps all the profit
- two or more owners who share the profit
- owned by shareholders, shares not sold to the public
- aims to help a cause and reinvests any surplus
Match the term to its meaning
- limited liability
- unlimited liability
- shareholder
- public limited company
- owners can only lose what they invested
- owners can lose personal possessions for debts
- a part-owner of a limited company
- a company whose shares are sold on the stock exchange
Which fits Priya?
Priya is setting up alone as a mobile hairdresser, with a few hundred pounds of equipment, and wants to be trading next week with as little paperwork as possible. Which ownership type fits her, and why?
- A sole trader, because she can start immediately and keep full control
- A partnership, so she can share the workload and the risk
- A private limited company, to shield her house from business debts
- A public limited company, so she can raise finance by selling shares
Limited liability
Select the TWO types of business with limited liability.
- A private limited company.
- A public limited company.
- A sole trader.
- A partnership.
Order the growth
Put the steps in order to show how a business might grow.
- A business starts as a sole trader
- The owner takes on a partner to form a partnership
- It becomes a private limited company
- It becomes a public limited company on the stock exchange
Summarise the structures
A _____ trader has one owner with unlimited liability. A _____ has two or more owners. A private limited company is owned by _____ and has _____ liability. A public limited company sells its shares on the stock _____.
Count the owners
How many owners does a sole trader business have?
Spot the two with limited liability
Tap the TWO types of business with limited liability.
- a private limited company
- a public limited company
- a sole trader
- a partnership
- a market stall
Which type of ownership?
Decide which type of ownership each business is.
- One person runs a small shop and keeps all the profit
- Two friends run a business together and share the profit
- A large firm is owned by shareholders with limited liability
Recommend a structure
A person is starting a small business on their own with little money. Recommend the most suitable ownership type and explain why, including the risk of liability.
- Recommend an ownership type
- Explain one advantage for a new small business
- Explain the liability risk