Cambridge Notes, Past Papers, Revision Questions

1.2 Business Structure – Business Ownership

What is Business Ownership?

Think of a business as a garden. The owner is the gardener who decides what plants to grow, how much water to give, and who helps with the work. In business terms, the owner controls the direction, bears the risks, and enjoys the rewards. 🌱

Types of Business Ownership

Structure	Key Features	Pros	Cons
Sole Trader 🧑‍💼	Single owner, simple setup, full control.	Easy to start, all profits kept, flexible decisions.	Unlimited liability, limited capital, heavy workload.
Partnership 🤝	Two or more owners, shared responsibilities.	Shared capital, complementary skills, shared risk.	Joint liability, potential conflicts, profit sharing.
Limited Company 💼	Separate legal entity, shareholders, directors.	Limited liability, easier to raise funds, perpetual existence.	More regulation, double taxation (unless LLP), higher setup cost.
Co‑operative 👥	Owned by members who use the service.	Democratic control, shared profits, community focus.	Decision making can be slow, limited capital, complex governance.

Structure

Key Features

Pros

Cons

Sole Trader 🧑‍💼

Single owner, simple setup, full control.

Easy to start, all profits kept, flexible decisions.

Unlimited liability, limited capital, heavy workload.

Partnership 🤝

Two or more owners, shared responsibilities.

Shared capital, complementary skills, shared risk.

Joint liability, potential conflicts, profit sharing.

Limited Company 💼

Separate legal entity, shareholders, directors.

Limited liability, easier to raise funds, perpetual existence.

More regulation, double taxation (unless LLP), higher setup cost.

Co‑operative 👥

Owned by members who use the service.

Democratic control, shared profits, community focus.

Decision making can be slow, limited capital, complex governance.

Choosing the Right Structure

Assess risk tolerance – do you want to protect personal assets? 🛡️

Consider capital needs – can you raise money on your own or need investors? 💰

Evaluate control – do you want to make all decisions or share them? ⚖️

Look at tax implications – some structures offer tax advantages. 📊

Check legal and regulatory requirements – some forms need more paperwork. 📑

Analogy: Choosing a business structure is like picking a vehicle for a trip. A scooter (sole trader) is quick and simple, a car (partnership) offers more space, a truck (limited company) can carry heavy loads, and a bike (co‑op) is shared among riders.

Exam Tips & Tricks

Remember the definition of liability – unlimited vs. limited.

Use the SWOT framework to analyse each structure.

Show real‑world examples (e.g., Apple as a limited company).

Apply the cost–benefit analysis – list pros and cons clearly.

Practice case studies – decide the best structure for a given scenario.

Remember: The objective is to match the business’s goals, resources, and risk appetite with the most suitable ownership form. 📚

Key Formulae

Profit calculation: \$P = R - C\$ where \$R\$ is revenue and \$C\$ is costs. 📈

For a limited company, double taxation can be shown as: \$\text{Tax}{\text{corporate}} + \text{Tax}{\text{dividend}}\$