Entrepreneurship and Business Ownership
Entrepreneurship and business ownership
This domain covers the entrepreneur's role, the business plan, sources of start-up finance and the legal forms a business can take. Exam questions compare liability, control, continuity, finance-raising and taxation across ownership types.
Core rules and concepts
- An entrepreneur spots an opportunity, organises resources, takes calculated risks and innovates. A business plan sets out the idea, market evidence, operations, finance and risks; it supports loan applications and clarifies strategy, but does not guarantee success.
- Sole trader: one owner, unlimited liability, full control, easy to start, limited capital.
- Partnership: two or more owners; a partnership deed should state profit shares and decision rules; ordinary partners usually have unlimited liability, while limited partners contribute capital but do not manage.
- Private limited company (Ltd): separate legal personality, limited liability, shares sold privately, accounts filed; public limited company (PLC) can offer shares to the public and must meet stricter disclosure rules.
- Cooperatives are owned and democratically controlled by members; franchises license a proven model in return for fees; public corporations are state-owned and answer to government.
Worked example
Two friends run a catering partnership with unlimited liability. A customer sues after an illness linked to their food and the claim exceeds the firm's assets. Their personal assets are at risk. If they incorporate as a private limited company, the company is liable and their liability is normally limited to unpaid share capital, provided they have not given personal guarantees or traded wrongfully. The trade-off is loss of privacy and filing obligations. Reasoning: incorporation changes the legal person, not the underlying risk; insurance and food-safety controls remain essential.
Traps that cost marks
Do not say limited liability means the company has limited funds. Do not confuse a private limited company with a partnership because both are "private". Do not claim a PLC must be large. Do not ignore personal guarantees, which can override limited liability. When comparing forms, address at least liability, control, finance and continuity.