What are the different business organization types and its form

Updated: Feb 11

There are four (4) types of business organization


  1. Sole trader

  2. Partnership

  3. Private Limited (Incorporated)

  4. Public Limited (Incorporated)


Forms of business organisation

  1. Joint ventures

  2. Franchises

  3. Social enterprise

  4. Public corporations


Sole trader


Sole traders are businesses owned and fully controlled by a single owner. Therefore, they are usually small businesses that do not need a lot of capital to operate its business. It is easy to set up and does not need to publish any financial accounts. As the only owner, the sole trader must ensure that the business generates revenue, or it will not receive any income as it receives all profits and bear all losses. As the business and owner are not separate entities, the owner has unlimited liability, making the owner at risk of bankruptcy should the owner be unable to repay its debts. Many small businesses start as sole trader before it becomes incorporated, unless the owner wants it to remain small.


Partnership


A partnership is a legal agreement between 2 or more individuals to operate a business. Partners earn their share of profits from the amount of work and responsibility they put into the business. As the business grow, a partnership tends to include more partners with more skills, as more responsibility and workload can be shared, and more capital can be raised. This may sometimes lead to disagreements in decision-making.


Like sole traders, partnerships are not incorporated, as such, their business are not separate entities, making all partners having unlimited liability. However, should the partnership register as a limited liability partnership, all partners will have limited liability.