Private Sector - Organisations are owned and controlled by private individuals and businesses, rather than by the government.
Public Sector - Organisations under the ownership and control of the government. Traditionally, they provide essential goods and services that may be unsustainable enterprises for the private sector (i.e. emergency services, education).
Sole Trader / Proprietorship - A business that is owned and controlled by an individual or singular entity (i.e. self-employed plumbers and mechanics, cafes, farms, florists, etc.).
Lower Start-Up Costs - Sole traders are generally small enterprises that would require small start-up costs due to a smaller expected output.
Profit taking - Sole traders receive full profits of their business, guaranteeing that a rise in effort and productivity would promise higher monetary returns.
Autonomy - Sole traders are their own boss, and hence have full authority in decision-making.
Privacy - Unlike other types of businesses, sole traders do not have to publish financial records and the owner enjoys confidentiality.
Unlimited liability - As an unincorporated business, the sole trader and her/his business is seen as the same legal entity, and hence the trader will be liable for all debts incurred by the business.
Limited sources of finance - Sole traders will find it difficult to secure funding beyond personal savings and their private network, as licensed money lenders may judge a sole trader to be risk averse.
Limited economies of scale - A sole trader will not be able to exploit the reduction of costs with an increased scale of production. This puts them at an economic disadvantage in terms of pricing and availability in comparison to large incorporated businesses.
Partnerships - An unincorporated business owned by 2 to 20 parties who manage and operate the business, sharing its profits and losses. Partnerships may have a “silent partner”, who has a financial stake in the business but is not involved in its daily operations.
Specialisation and Division of Labour - Often in partnerships, the synergy of experience and skillsets improve the efficiency of operations as different partners manage different functions and operations of the business.
Financial Privacy - As an unincorporated business, partnerships enjoy financial privacy as they do not have to publicise their financial records to stakeholders.
Unlimited Liability - Partnerships are liable for debts incurred by the business as the owners and the business are seen as the same legal entity.
Conflict - Often in partnerships the multiple owners will oppose each other with different perspectives on a decision. The conflict prolongs decision making and hampers the efficiency of operations.
Companies - Incorporated businesses owned by shareholders.
Private Limited Company - A company that cannot raise share capital from the general public. Companies often choose to stay limited when owners want to retain strict ownership and control over operations.
Public Limited Company - A company that is able to advertise and sell its shares to the general public via a stock exchange. Companies tend to crossover from private to public with an Initial Public Offering (IPO), where its shares are listed on the public stock exchange for the first time.
Raising Capital - Companies are able to generate large amounts of profits with the sale of their stock, which they can repeat regularly after they perform a stock buy-back so that they can resell the stock at a higher price.
Limited Liability - Companies are seen as separate legal entities from its owners. Hence, shareholders and other stakeholders do not risk personal assets when the company incurs debts.
Economies of Scale - Companies often operate at a large scale, allowing them to benefit from economies of scale due to a reduction in unit costs of production.
Bureaucracy - As a business grows, its structure becomes more complex. Companies are often large businesses with many layers, and the time lag for communication to climb through each layer to the next decreases its inefficiency and isolates employees from upper-management.
Disclosure of Information - Financial data of companies must be disclosed to all shareholders. On top of the time and cost of audits, companies become vulnerable to market reactions to their financial records, which may threaten to lower their stock value.
Social Enterprise - Revenue-generating businesses with social objectives at the core of their operations. Whilst commercial for-profit businesses commonly aim to maximise revenue and cut costs, social enterprises have an added philanthropic motivation.
Non-profit social enterprises - Businesses run in a commercial-like manner but without profit being the main goal. Instead, non-profit organisations (NPOs) use surplus revenues to achieve their social goals rather than distributing it as profits or dividends. (Public libraries, public schools, museums, government hospitals, social services, etc.)
Cooperatives - For-profit social enterprises owned and run by their members, such as employees or customers, with the common goal of creating value for their stakeholders by operating in a socially responsible way. Cooperatives share any profits earned between all members, who all have decision-making authority.
Incentive to Work - In cooperatives, all employees have a stake in the business, and are hence directly affected by its performance. This enhances staff motivation and labour productivity.
Public Support - As a social enterprise, cooperatives are viewed favourably by the public over businesses that do not advocate social objectives.
Slow Decision-Making - As every member of a cooperative holds decision-making authority, the efficiency of the business may be negative as opposing perspectives may spark conflicts during decision-making processes.
Limited Sources of Finance - As a social enterprise, cooperatives rely heavily on market awareness of their social objectives to sell their products, which tend to not be able to compete on a price standpoint due to the higher costs of acting more ethical (i.e. paying above minimum wage, sourcing materials locally, forwarding a percentage of profits to a social cause).
Microfinance Providers - A type of financial service aimed at entrepreneurs of small businesses, especially to entrepreneurs with a low socio-economic status who would be unable to secure a loan from a bank or an investor. As a social enterprise, microfinance providers enable disadvantaged members of society to gain access to essential financial services that will allow them to take their first steps into business to lift themselves out of poverty.
Social Benefits - When entrepreneurs are successful with the loans received from microfinance providers, a budding business will spawn new job opportunities and have other beneficial effects on society and the local economies.
Negative Stereotype - Microfinance providers are critiqued as immoral for preying on the poor and financially vulnerable, as they often charge high interest on loans.
Limited Finance - Microfinance schemes have a high risk of default as most borrowers use the funds in its entirety to start a business, which may or may not succeed.
Public-Private Partnerships - A contractual partnership between the government or public agencies and the private sector to provide goods or services to the public that are often not profitable. Public agencies can gain the expertise of partnering with specialised organisations in the industry to complete projects that would otherwise not have financial benefits for the private sector.
Non-Governmental Organisations - A non-profit social enterprise that is set up and run for societal benefits, but operates in the private sector. UN definition “Private organisations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services or undertake community development.”
Charity - A non-profit social enterprise that provides voluntary support for good causes, such as the protection of children, animals and the natural environment. Its key function is raising funds through donations in order to financially support a cause.
Tax Exemptions for NPOs - Charities are exempt from corporate tax, and benefit from concessions for other taxes such as business rates, land tax, capital gains tax and inheritance tax on gifts made in a will.
Tax Incentives for Donors - Charities have a reliable source of revenue from donations as donors are incentivised with tax allowances for the funds they donate to charities.
Limited Liability - Charities can register as limited companies to protect the interests of employees and managers, thereby increasing job security by reducing risks involved.
Disincentive Effects - The lack of a profit motive may cause the business to become unsustainable in the long term if costs start accumulating without the revenue to cover any debts incurred.
Large Barrier to Entry - New charities will face well-established, multinational charities who have already gained the trust of their donors.
Bureaucracy - Charities are under scrutiny by governing bodies to ensure they do not commit any fraudulent activities.