Forms of Business Ownership: notes

Main Forms

• Sole trader: one owner. Easy to start and the owner keeps all profit, but has unlimited liability and limited capital. A barber in Bulawayo is an example.
• Partnership: two to twenty owners who share profit and work. More capital and skills, but partners can disagree. Partners usually have unlimited liability.
• Private limited company: shareholders own it and shares are not sold to the public. Liability is limited to the money put in.
• Public limited company: shares can be sold to the public, for example on the Zimbabwe Stock Exchange. It can raise large capital.
• Cooperative: members own and run it together, for example a farmers' marketing group. Profit is shared by members.
• State-owned enterprise: owned by the government to provide services such as electricity.

Key Ideas

• Unlimited liability: owners must pay business debts from personal property.
• Limited liability: owners can lose only what they invested.
• Continuity: a company continues if an owner dies; a sole trader's business may end.
• Partnership agreement: a written deal on capital, duties and sharing of profit.
• Choosing a form: think about capital needed, risk, control and the number of owners.