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1.2 Types of Business Entities

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8 views2 pages

1.2 Types of Business Entities

Uploaded by

wendiun
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

2 Types of business entities


Glossary of key terms

This refers to any business organisation that is owned by its


Companies (corporations) shareholders, who have limited liability. They comprise of privately
held companies and publicly held companies.

These are for-profit social enterprises owned and run by their


Cooperatives members (usually employees, managers or customers). Their
primary goal is to create value for their member-owners.

A legally binding contract that all joint owners of a partnership sign,


Deed of Partnership stating the purpose of the business, the formal rights of the partners,
and how any profits should be split.

This means that there is a legal difference between the owners of a


Incorporation (incorporated) company (the shareholders) and the business entity itself. This
ensures that the owners are protected by limited liability.

An IPO occurs when an organization sells all or part of its business


Initial public offering (IPO) to shareholders on a public stock exchange for the first time. This
changes the legal status of the business to a publicly held company.

This legal status of a business enables its shareholders (business


Limited liability owners) not to be liable for more than the original amount of money
invested in the business.

This is a special type of partnership where one or more partners


contribute capital and enjoy a share of the profits but do not
Limited partnership
participate in the running of the business. However, at least one
partner must still have unlimited liability.

A type of non-profit organization (NPO) operating in the private


Non-governmental
sector of the economy for the benefit of others in society (rather than
organizations (NGOs)
for shareholders).

A business alliance consisting of between 2 and 20 individual


Partnership owners who are jointly responsible for the business (although this
number can vary between countries).

Private sector This section of the economy is made up of businesses that are
owned by individuals or groups of individuals, rather than by the
government.

This is a business owned by shareholders with limited liability, but


Privately held company
the shares cannot be traded on a public Stock Exchange.

A joint-stock company owned by shareholders. The shares in a


Publicly held company publicly held company can be bought and sold by the general public,
without prior approval of existing owners.

Businesses in this section of the economy are run and owned by the
Public sector government in order to provide essential services for society as a
whole, e.g., education and healthcare services.

Also known as a silent partner, this is an investor in a partnership


Sleeping partner but who does not get involved in the daily running and management
of the organization.

These organizations are revenue-generating businesses with


Social enterprises community (social) objectives at the core of their operations in order
to benefit the general public, rather than private shareholders.

Sole trader (sole An organization which is owned by a single entrepreneur who has
proprietor) exclusive responsibility for the running of the business.

This is any marketplace where the general public and other


Stock exchange
companies can buy and/or sell shares.

This means the owner(s) of a business (such as a sole trader or


Unlimited liability partner) is personally liable for any business debts, even if this
requires the debts to be settled by selling off personal assets.

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