Unit 4.

1 Types of Business Organisation (Introduction)

The Entrepreneur Test: http://www.bizmove.com/other/quiz.htm

Starting a Business

An ___________________ combines and organizes resources in a firm for the purpose of

carrying out productive activity or business. Firms are therefore also known as
business organizations.

A firm may take a number of legal forms depending on how it is owned, controlled
and financed.

There are many questions that you must ask yourself before starting a business but
below are some of the main questions that would help you determine what type of
business you should start. Should you…..

1. Set up the business by yourself (become a sole trade/proprietor)

2. Form a partnership with others or a limited company

Consider each question and then match one of the following responses to YES or NO:

1. Do I have enough capital (start-up money) to set up in business?

Yes No

2. Can I manage my business alone?

Yes No

3. Am I willing to share ownership and profits?

Yes No

4. Am I willing to risk everything I own?

Yes No

Financial liability in business

Owning a business involves financial risk

Unlimited liability
The financial obligation of business owners in the event of business failure is to
repay all business debts (even if it means selling off their personal possessions).

Limited liability
The financial obligation of business owners for business debts is no more than the
amount of capital they invested in the enterprise. This is because business owners
with limited liability have a separate legal identity from their business.