Professional Documents
Culture Documents
Public & Private Sector
Public & Private Sector
Private:-
These businesses are owned & controlled by private individuals with the primary aim to
maximise profits
Public Sector:-
These are owned and controlled by the govt with the primary aim of maximizing social welfare.
This means that if these firms make a loss, they will continue operations.
Legal Structures
Certain factors which will influence the choice of a particular legal structure include:
a) size of business
b) responsibility of owners
c) financial requirements/ sources of finance
d) the level of owner's risk
Limited Liability
The extent of loss to the owners is limited to the amount invested in the business
-> This means that the owner cannot lose more than the amount invested in the business.
-> this will encourage them to invest in the business
-> this will allow large amounts of money to be raised through issue of shares
Note:
Limited liability is for incorporated (seperate legal identity/existence)
-> finances of owner and business are seperate
-> sue and be sued in the court of law
-> it can own assets in its name
Unlimited Liability
-> The responsibility of the owner for business debts is not limited to the amount invested in
the business
-> in case of bankruptcy, the owner might have to sell personal belongings to pay off the debts
The owner is personally responsible for repaying the debts.