1.2 Types of Business Entities

Question 1

Cooperatives

Answer 1

Cooperatives are for-profit social enterprises set up, owned and run by their members, who might be employees and/or
customers.

Question 2

Company / Corporation

Answer 2

A company (or corporation) refers to a limited liability business
that is owned by shareholders. A certificate of incorporation
gives the company a separate legal identity from its owners
(shareholders).

Question 3

Deed of Partnership

Answer 3

Deed of partnership is the legal contract signed by the owners of a partnership. The formal deeds specify the name and responsibilities of each partner and their proportion of any profits or losses.

Question 4

Incorporation

Answer 4

Incorporation means that there is a legal difference between the owners of a company and the business itself. This ensures
that the owners are protected by limited liability.

Question 5

Initial public offering (IPO)

Answer 5

An initial public offering (IPO) occurs when a business sells all or part of its business to shareholders on a public stock exchange for the first time. This changes the legal status of the business to a publicly held company.

Question 6

Limited liability

Answer 6

Limited liability is a restriction on the amount of money that
owners of a company can lose if the business goes bankrupt, i.e.
shareholders cannot lose more than the amount they invested
in the company.

Question 7

Non-governmental organizations (NGOs)

Answer 7

Non-governmental organizations (NGOs) are private sector
not-for-profit social enterprises that operate for the benefit of
others rather than primarily aiming to earn a profit, such as
Oxfam and Friends of the Earth.

Question 8

Partnerships

Answer 8

Partnerships are a type of private sector business entity owned by 2-20 people (known as partners). They share the
responsibilities and burdens of running and owning the business.

Question 9

Private sector

Answer 9

The private sector is the part of the economy run by private individuals and businesses, rather than by the government,
such as sole traders, partnerships, privately held companies and
publicly held companies.

Question 10

Privately held company

Answer 10

A privately held company is a business owned by shareholders
with limited liability but whose shares cannot be bought by or sold to the general public on a Stock Exchange.

Question 11

Publicly held company

Answer 11

A publicly held company is an incorporated limited liability business that allows shareholders to buy and sell shares in the
company via a public Stock Exchange.

Question 12

Public sector

Answer 12

The public sector is the part of the economy controlled by the
government. Examples include state healthcare and education
services, the emergency services, social housing and national defence.

Question 13

Sole trader

Answer 13

A sole trader is a self-employed person who runs the business
on his/her own. This means s/he has exclusive responsibility for
its success (profits) or failure (unlimited liability).

Question 14

Social enterprises

Answer 14

Social enterprises are revenue-generating businesses with
social objectives at the core of their operations. They can be for-
profit or non-profit business entities, but all profits or surpluses
must be reinvested for that social purpose rather than being distributed to shareholders and owners.

Question 15

Stock exchange

Answer 15

A stock exchange is a marketplace for trading stocks and shares
of publicly held companies (or public limited companies). Examples include the London Stock Exchange (LSE) and the
New York Stock Exchange (NYSE).

Question 16

Unlimited liability

Answer 16

Unlimited liability is a feature of sole traders and ordinary partnerships who are legally liable or responsible for all monies
owed to their creditors, even if this means that they have to sell
their personal possessions to pay for their debts.