Types of business organisation
Introduced| English | Meaning |
|---|---|
| liable/ˈlaɪəbl/ | Legally responsible for an obligation, debt or consequence. |
| sole trader/səʊl ˈtreɪdə/ | A business owned and operated by one person, usually without a legal separation between the owner and the business. |
| partnership/ˈpɑːtnəʃɪp/ | A business owned by two or more people who share its management, profits and responsibilities under an agreement. |
| unlimited liability/ʌnˈlɪmɪtɪd ˌlaɪəˈbɪlɪti/ | The owner's legal responsibility for business debts without a fixed limit, potentially putting personal assets at risk. |
| private limited company/ˈpraɪvət ˈlɪmɪtɪd ˈkʌmpəni/ | An incorporated business whose owners have limited liability and whose shares are not offered to the general public. |
| public limited company/ˈpʌblɪk ˈlɪmɪtɪd ˈkʌmpəni/ | A company with limited shareholder liability whose legal form permits shares to be offered to the public, subject to applicable rules. |
| shareholders/ˈʃeəhəʊldəz/ | People or organisations that own shares in a company. |
| limited liability/ˈlɪmɪtɪd ˌlaɪəˈbɪlɪti/ | A legal arrangement limiting owners' responsibility for business debts to their investment or another specified amount. |
| creditors/ˈkredɪtəz/ | creditors |
Who owns the business?
- A one-person market stall and a global company are owned in completely different ways.
- The type of business organisation decides who owns it and who is liable 负有责任 for its debts.
Choose the ownership form
Compare ownership, control and liability in real business types.
A sole trader has:
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A sole trader is personally liable for all debts.
A partnership has two or more owners who share the capital and risk.
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Partners share ownership, profit and (usually) unlimited liability.
When owners risk their personal possessions for business debts, they have ______ liability.
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Sole traders and partnerships usually have unlimited liability.
Sole trader 独资企业 and partnership 合伙企业
- Sole trader: one owner. Easy to set up, keeps all profit — but unlimited liability 无限责任.
- Partnership: 2+ owners share capital, work and risk; usually still unlimited liability.
Business types split by liability into unincorporated and incorporated
Limited liability means shareholders can lose:
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Their loss is capped at their investment.
An advantage of becoming a limited company is:
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Limited liability protects owners' personal assets.
Limited companies
- Private limited company 私人有限公司 (Ltd) and public limited company 公众有限公司 (plc) are owned by shareholders 股东.
- They have limited liability 有限责任: owners can lose only what they invested.
Businesses make goods and services to meet people's needs and wants
Comparing them
- Sole trader/partnership: simple and private, but risky (unlimited liability), hard to raise finance.
- Companies: can raise more finance and protect owners, but face more rules and shared control.
Unlimited liability puts personal assets at risk. If a sole trader's business fails, creditors 债权人 can take the owner's personal possessions. A shareholder in a limited company cannot lose more than they invested.
You've got it
- sole trader (one owner) and partnership (a few) — usually unlimited liability
- Ltd and plc are owned by shareholders with limited liability
- companies raise more finance and limit risk, but face more rules
Write from a personal claim of 5000
- A sole trader put 4000 into a business that now owes 9000.
- A shareholder who paid 4000 for shares can lose at most that 4000.
A sole trader invested 4000, and the failed business owes 9000. How much of the owner's personal wealth is still at risk, and how does that differ for a shareholder who paid 4000?
Unlimited liability reaches the owner's personal assets. Limited liability stops the loss at the amount invested in the shares.
How much beyond the 4000 already invested can creditors claim from the sole trader?
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9000 minus 4000 is 5000, and unlimited liability leaves that amount at risk. Other options — Nothing (because every owner has limited liability); Only 4000 (the same cap as a shareholder).