1.2 Business AS structure
- Syllabus
- 9609–2026–2027
- Topic
- 1.2
- Level
- AS
Learning objectives
1.2.1Economic sectors• Economic sectors- the primary, secondary, tertiary and quaternary sectors and businesses within those sectors- the public and private sectors and businesses within those sectors- the reasons for and consequences of the changing relative importance of these sectors1.2.2Business ownership• Business ownership- the main features of different types of business ownership: sole traders, partnerships, private limited companies, public limited companies, franchises, co-operatives, joint ventures and social enterprises- the appropriateness of different types of business ownership- the concepts of unlimited liability and limited liability and their importance- the advantages and disadvantages of changing from one type of business ownership to another
Classify sectors by activity and by ownership—two different questions
| Activity sector | Value-creating activity | Examples |
|---|---|---|
| Primary | Extracts/harvests natural resources | Farming, fishing, forestry, mining, oil extraction |
| Secondary | Manufactures/processes materials or constructs | Food processing, factories, construction |
| Tertiary | Supplies services to consumers/businesses | Retail, transport, banking, tourism, healthcare |
| Quaternary | Knowledge, information, research and high-level intellectual services | ICT/computing, R&D, consultancy, cyber security, data/media/design |
One business can span sectors: a farm (primary) may process food (secondary), sell/deliver it (tertiary) and run crop-data R&D (quaternary). Classify the activity described, not the whole brand by one label.
| Ownership sector | Meaning | Typical examples/objective |
|---|---|---|
| Private sector | Owned/controlled by private individuals, partners, members or shareholders | Sole traders, private/public limited companies, co-operatives; profit or social objectives |
| Public sector | Owned/controlled/accountable to central or local government/state | Public services and public enterprises; access, service, strategic or social objectives |
| Driver of changing relative importance | Consequence |
|---|---|
| Rising income, urbanisation and changing demand | Tertiary/quaternary demand and employment can grow |
| Technology, mechanisation and productivity | Primary/manufacturing employment share may fall even if output rises |
| Industrialisation/deindustrialisation and global trade/FDI | Resources/jobs shift across sectors and countries; supply chains deepen |
| Education/skills and digitalisation | Knowledge-intensive services expand; skill gaps/inequality may emerge |
| Privatisation/nationalisation, policy and public finance | Ownership balance, objectives, competition and accountability change |
| Resource depletion/environmental transition | Activities contract, relocate or move toward renewable/circular models |
‘Public sector’ means government-owned, not a public limited company; a PLC is privately owned by shareholders. Sector shares do not by themselves prove profitability, development or job quality—compare output, employment, productivity and ownership separately.
Ownership determines control, liability, finance and purpose
Unlimited liability means owners are personally responsible for business debts, so personal assets may be at risk. Limited liability normally restricts a shareholder's loss to the amount invested because an incorporated company has separate legal personality; the company can still fail and guarantees/fraud can create exceptions.
| Form | Control/finance/liability | Main trade-off |
|---|---|---|
| Sole trader | One owner, full control/profit, usually unlimited liability | Easy/private/fast versus limited finance, workload, no continuity and personal risk |
| Partnership | Two or more owners share decisions, profit and resources; usually unlimited unless legally limited | More skills/finance versus conflict, shared profit and mutual liability |
| Private limited company (Ltd) | Invited/private shareholders; incorporated, limited liability, continuity; shares not publicly traded | More finance/protection versus formalities, disclosure and possible dilution |
| Public limited company (PLC) | Shares offered/traded publicly; limited liability and large equity pool | Expansion/liquidity/status versus cost/disclosure, ownership-control divorce and takeover/dilution risk |
| Form | Defining arrangement | Suitability/limitation |
|---|---|---|
| Franchise | Franchisee pays fees/royalties for franchisor brand, system, training/support | Proven model lowers start-up risk but limits decisions and shares revenue |
| Co-operative | Member-owned/controlled for mutual benefit, shared decision/profit | Alignment and participation versus slower decisions/finance limits |
| Joint venture | Separate collaborative project/business with shared resources, risk and control | Local knowledge/skills and cost sharing versus conflict, leakage and divided control |
| Social enterprise | Trades with mainly social/environmental objectives and reinvests most surplus toward mission | Reputation, staff/customer/investor/grant appeal versus mission-profit tension and finance constraints |
Choose by objectives and mission, desired control, owners' risk tolerance, capital needed, continuity, skill contribution, speed/flexibility, disclosure/legal cost, tax/regulation, scale and stakeholder expectations. No form is automatically best or most profitable.
| Change | Possible advantage | Possible disadvantage |
|---|---|---|
| Sole trader/partnership → Ltd | Limited liability, continuity, shares/credibility and separate legal action | Formalities/cost/disclosure, profit/control shared |
| Ltd → PLC | Much wider equity pool for expansion, easier share sale, publicity | Flotation/compliance cost, public accounts, pressure/dividends, control dilution and hostile takeover risk |
| Independent → franchise/co-operative/JV/social model | Brand/support, member alignment, partner resources or mission differentiation | Fees/rules, shared decisions/control or constrained objectives |
For a conversion judgement, connect the business's actual funding gap, gearing, growth plan, current ownership percentage, desired control and investor demand to consequences. More equity can finance growth, but existing owners benefit only if growth/value gains outweigh dilution, costs, changed dividends/objectives and takeover risk.