Level 3 Business BTEC International

Types of businesses and their legal structures

The Sole Trader

• Recognised as the simplest form of business structure.
• Only one individual who is the exclusive owner of the business.
• The owner has unlimited liability, which means if the business incurs debt, the owner is personally liable.
• There is no distinction between the business and the individual in terms of legal liabilities.

Partnerships

• Similar to the sole trader but is formed with two or more people who share ownership.
• Jointly liable for any business debts or obligations.
• There can be varying levels of input and investment from the partners, often detailed in a partnership agreement.

Private Limited Companies (Ltd)

• Owned by shareholders who each have a portion of ownership in the company, known as shares.
• Liability is limited to the amount invested in the business.
• Shares cannot be sold to the public but can be sold privately, often to family and friends.
• The company does not cease to exist upon the death of a shareholder; the shares are passed onto their next of kin.

Public Limited Companies (Plc)

• Shares are open to be bought and sold on the stock market.
• Adheres to more stringent regulations than a private limited company as they are answerable to its shareholders.
• The owners only have liability for the worth of their investment into the company’s shares, meaning they have limited liability.
• The minimum share capital for a PLC is £50,000.

Cooperatives

• Owned and run by its members.
• Each member has an equal vote regardless of their amount of investment, following a one member one vote rule.
• The profits are divided among the members in relation to the amount of input into the cooperative.
• Cooperatives function by their own rules, providing a democratic organization structure.

Franchises

• A brand allows an owner (franchisee) to use their brand name, products, and business model for a fee.
• The franchisee gains benefit from brand recognition and support from the established company (franchisor).
• The franchisor receives a franchise fee or royalty from the franchisee.
• Although the franchisee has little control over the brand and operation procedures, they do own the franchise outlet.

Nonprofit Organisations

• Primarily focusing on issues for the greater good rather than maximising profit.
• The income generated through their operations is used for the cause they are supporting.
• Although they are not legally required to pay tax as per for-profit companies, they must adhere to charity legal structures.

Social Enterprises

• Operates like a business but reroutes their profits to a specific social cause.
• Aims to be self-sustainable.
• Often revitalising communities or addressing social issues, social enterprises blur the line between non-profit and for-profit.

Multinational Corporations

• Operates in more than one country.
• Able to take advantage of different markets, labour costs and tax laws across the globe.
• They have a huge influence on global politics and economies.
• Includes brands such as Coca-Cola, Apple and McDonald's.