IGCSE Business Studies: Chapter 1.4 Types of Business Organisations

Sole Trader Business Structure
📌 A sole trader is owned by one person who maintains full control and receives all the profit.
⚠️ The primary disadvantage is unlimited liability, meaning personal assets (like house or car) are at risk if the business goes bankrupt.
📉 Disadvantages also include lack of capital (being only one person) and lack of continuity if the owner dies.

Partnerships
🤝 A partnership involves two to 20 people who own the business jointly, sharing finances and profits.
🌟 Advantages include ease of setup, sharing of skills and ideas, and shared costs among partners.
🛑 Key disadvantages are the potential for conflict among partners and unlimited liability.

Franchises
🔑 A franchisor grants a license to a franchisee to use their business idea (e.g., McDonald's), allowing for very fast expansion.
💰 Franchises receive a fee, a share of profits, and access to local market knowledge.
📉 Disadvantages include the risk that poor decisions by a franchisee damage the franchisor’s reputation, and the cost of providing ongoing training and support.

Joint Ventures
👯 Occurs when two or more businesses start a new project together (e.g., BMW and Mini creating an electric car).
📉 Advantages include reducing risk and cutting costs, while sharing diverse expertise and R&D.
🤕 Mistakes reflect on all participating parties, and decision-making can be slow due to potential disagreements.

Limited Companies (Private vs. Public)
✨ Private Limited Companies (Ltd) are owned by shareholders who can only sell shares privately (friends/family), offering limited liability and continuity.
📈 Public Limited Companies (PLC) can sell shares to the public stock market, providing significant liquidity and limited liability.
❌ PLCs must disclose accounts, risking knowledge leakage to competitors, and face potential loss of control as shares are sold publicly.

Incorporated vs. Unincorporated Businesses
⚖️ Unincorporated businesses (Sole Trader, Partnership) lack separate legal identity, resulting in unlimited liability.
🛡️ Incorporated businesses (Ltd, PLC) have a separate legal identity and limited liability, meaning only business assets are lost upon failure.

Public Sector Objectives
🏛️ The public sector involves commercial activities run by the government with the objective to improve the country, not primarily to make a profit.
🏥 Objectives include improving essential services (water, transport, electricity) and providing socially desirable services (education, medicine, libraries).

Key Points & Insights
➡️ Sole Traders risk personal assets due to unlimited liability, and may face cash flow issues due to a lack of capital.
➡️ Partnerships are formed to gain more capital and share risk, but must manage potential partner conflicts.
➡️ A key advantage of becoming a Private Limited Company is limited liability protecting personal assets.
➡️ Public Limited Companies (PLC) are often better for growing businesses due to significantly larger access to capital via the global stock market, enabling quicker expansion.

📸 Video summarized with SummaryTube.com on Feb 07, 2026, 09:10 UTC