Business Ownership and Organisation
Business Ownership and Organisation tests legal forms, liability, control, capital and continuity, and how businesses structure themselves.
Forms compared
- Sole trader: one owner, unlimited liability, no separate legal personality, easy to start, taxed as personal income.
- Partnership: 2–20 owners, shared capital and skills, unlimited liability unless a limited partnership, governed by a partnership agreement.
- Private company: separate legal entity, limited liability, shares not offered to the public, registration and annual returns required.
- Public company: shares traded on a stock exchange, stricter disclosure and governance.
- Cooperative: owned by members, one member one vote, surplus distributed as a patronage dividend.
- Franchise: a licence to use another firm's brand and system; it is a way of doing business, not a separate legal form.
Worked example
Two friends plan a bakery needing E50,000 capital. As a partnership they can start quickly, but each is personally liable for debts; a supplier claim could reach their homes. As a private company they must register and file returns, but liability is limited to their shares, and they can sell shares to family to raise capital. If risk is high and they can afford compliance, the private company is safer; if the venture is small and trust is high, a written partnership agreement is cheaper.
Traps
- Saying a company is owned by its directors - shareholders own it, directors manage it.
- Assuming limited liability survives fraud or personal guarantees.
- Forgetting that a sole trader's business profit is taxed with personal income.
- Mixing a franchise, which is a business model, with a company, which is a legal form.