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Business Structure and Ownership

The Role of Structure

Why Structure Matters

Business structure refers to how an organisation is legally and operationally set up. It determines the ownership, control, administration, and liability of a business. Different structures suit different types of businesses based on size, complexity, goals, and legal requirements.

Business Sectors Glossary

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Primary Sector

This sector involves extracting natural resources directly from the earth. Activities include farming, fishing, mining, forestry, and oil extraction.
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Secondary Sector

This involves manufacturing and industrial processes that transform raw materials into finished or semi-finished products. Examples would be factories producing cars, clothing, or electronics.
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Tertiary Sector

This sector provides services rather than goods. These include retailers, banks, schools, hospitals, and entertainment providers.

Main Ownership Structures

1

Sole Traders

One individual owns and runs the business. The owner has full control but also unlimited liability, meaning personal assets can be used to pay business debts.
2

Partnerships

Two or more people share ownership and management. Allows for shared responsibility and resources. Liability can be unlimited, though limited liability partnerships (LLPs) exist.
3

Private Limited Companies (LTD)

Incorporated businesses with a separate legal identity. Ownership is divided into shares, which are privately held. Shareholders have limited liability.
4

Public Limited Companies (PLC)

Larger companies whose shares are traded on stock exchanges and available to the public. PLCs have greater regulatory obligations. PLC status allows significant capital raising.

Liability & Risk

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Limited Liability (LTD/PLC) Shareholders have limited liability, meaning personal assets are protected. Suited for medium and large businesses.
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Unlimited Liability (Sole Trader/Partnership) The owner has unlimited liability. Common in small businesses and self-employment.

Enterprise Objectives

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What is the primary goal of Not-for-Profit Organisations?
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These entities reinvest profits into achieving social, charitable, or community objectives rather than distributing profits to owners.
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And Social Enterprises?
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They combine profit motives with social goals. They aim to address social problems through entrepreneurial methods but reinvest profits for social benefit.

The Structural Equation

Structure = Risk Management + Finance Raising
The primary considerations when determining a business's legal and operational setup.

Summary

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The Strategic Choice: The choice of business structure affects how a business operates, how it raises finance, how risks are managed, and how it achieves its objectives.

Business Structure Deck
Term
Business Structure

What does business structure determine?

Answer
Definition

Ownership, control, administration, and liability of a business.

Term
Main Business Sectors

Name the three main business sectors.

Answer
Sectors

Primary, Secondary, and Tertiary sectors.

Term
Primary Sector Activities

What activities are included in the Primary sector?

Answer
Activities

Farming, fishing, mining, forestry, oil extraction.

Term
Secondary Sector Focus

What is the focus of the Secondary sector?

Answer
Focus

Manufacturing and industrial processes transforming raw materials into products.

Term
Tertiary Sector Businesses

What type of businesses are in the Tertiary sector?

Answer
Examples

Service providers like retailers, banks, schools, hospitals.

Term
Sole Trader

What is a sole trader?

Answer
Definition

A business owned and run by one individual with unlimited liability.

Term
Partnerships

What characterizes partnerships?

Answer
Characteristics

Shared ownership and management, with shared liability and profits.

Term
Private Limited Company (LTD)

Define Private Limited Company (LTD).

Answer
Definition

Incorporated with a separate legal identity, private shareholders, and limited liability.

Term
Public Limited Company (PLC)

What distinguishes a Public Limited Company (PLC)?

Answer
Distinction

Shares traded publicly on stock exchanges, with greater regulatory requirements.

Term
Not-for-Profit Organisations

What are not-for-profit organisations?

Answer
Definition

Entities that reinvest profits for social, charitable, or community objectives.

Term
Social Enterprises

Describe social enterprises.

Answer
Description

Businesses that combine profit-making with social goals, reinvesting profits for social benefit.

Term
Importance of Business Structure

Why is choosing a business structure important?

Answer
Importance

It affects operation, finance, risk management, and business objectives.

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🏢 Business Structure Quiz

1. Which business sector involves manufacturing and processing raw materials?

The secondary sector focuses on transforming raw materials into finished or semi-finished products.

2. What is a key feature of a sole trader business structure?

Sole traders have unlimited liability, meaning their personal assets can be used to pay business debts.

3. Which type of company has shares traded publicly on stock exchanges?

PLCs offer shares to the public and must meet higher regulatory standards.

4. Which sector includes businesses like hospitals and banks?

The tertiary sector focuses on service provision rather than goods.

5. What is a benefit of forming a private limited company?

Shareholders in an LTD have limited liability, protecting personal assets.

📊 Results

  • Notes and Quiz
  • Business
  • A Level
  • Business Fundamentals
  • OCR