Key Idea: Businesses can choose different forms of ownership. The key differences are control, liability, access to finance and legal identity — and IB exams test your ability to compare and apply these.
Core structure (memorise)
- Sole trader → 1 owner, unlimited liability
- Partnership → 2+ owners, shared responsibility
- Private limited company (Ltd) → private shareholders, limited liability
- Public limited company (PLC) → public shareholders, larger access to finance
- Cooperative → member-owned, democratic control
- Social enterprise → social or environmental mission before profit
👤 Small ownership businesses: **Sole trader:** full control, simple to set up, unlimited liability. **Partnership:** shared capital and skills, but shared profits and possible conflict. Often suited to smaller businesses with lower capital needs.
🏢 Companies: **Ltd** and **PLC** both have limited liability. Separate legal identity from owners. Usually stronger access to finance. Can involve less owner control.
High-yield facts examiners expect
- Unlimited liability = owner's personal assets may be used to pay business debts
- Limited liability = owners only lose what they invested
- Separate legal identity = the business is legally separate from its owners
- Legal continuity = the business continues even if ownership changes
- PLC shares are sold publicly on a stock exchange
- Ltd shares are sold privately to selected individuals or groups
- A deed of partnership sets out roles, responsibilities and profit sharing
- Cooperatives are usually run on a one member, one vote basis
- Social enterprises reinvest profit to support their mission
✅ Advantages: **Sole trader:** fast decisions, full control, keeps all profit. **Partnership:** more capital, shared workload, wider skills. **Companies:** limited liability, legal identity, greater growth potential. **Cooperatives:** strong member motivation, democratic decision-making. **Social enterprise:** strong ethical image and mission focus.
⚠️ Disadvantages: **Sole trader:** unlimited liability, limited finance, no legal continuity. **Partnership:** shared profit, disagreements, unlimited liability for many partners. **Companies:** more legal formalities, possible loss of control, less privacy. **Cooperatives:** slower decisions, harder to raise finance. **Social enterprise:** harder to balance mission and profit.
If the question says state features, only write features such as one owner, unlimited liability, separate legal identity or public sale of shares. Do not write advantages like easy to set up unless the question asks for them.
Example: Use point + explanation + business impact. For example: A private limited company has limited liability, which means shareholders only lose the amount invested, so personal assets are protected if the business fails.
Tip: Do not describe each type separately. Compare directly using words like whereas, however and compared with.
Important: IB often asks students to state features of sole traders, partnerships, private limited companies, public limited companies and cooperatives, or to explain one advantage and one disadvantage of a business type.
- Identify the business type
- Choose the correct feature or advantage
- Apply it to the business in the question
- Explain the impact on control, risk, finance or growth