Component 1: Business structure — Eduqas A-Level Business

Objectives shift as a firm ages, and that sequencing is where the marks sit. A new venture or one caught in a downturn targets staying in business, which means holding enough cash to pay wages and suppliers, and it will cut price below the level that maximises returns simply to keep cash coming in. Once established, the aim becomes revenue minus total costs, judged by net profit margin and by return on capital employed, which is operating profit divided by capital employed expressed as a percentage. Expansion follows, pursued organically or by takeover, buying market share and economies of scale but consuming cash and diluting control. The trade off to name is return now against expansion later, because both draw on the same cash.

State owned and state funded organisations answer to ministers, councillors or a board they appoint rather than to shareholders, so success is measured in social value, universal access and equity rather than in profit. Taxation pays for output private firms would under supply: public goods such as street lighting that nobody can be excluded from, and merit goods such as vaccination whose benefits spill over to people who never paid. The decision use is value for money, so a hospital trust is judged on waiting times and outcomes per pound spent rather than on return on capital employed, which is the private sector yardstick. The evaluative point is that with no profit signal there is no automatic test of efficiency, budgets can drift, and a short electoral cycle sits awkwardly with infrastructure that takes decades to pay back.

The United Kingdom runs a mixed economy, so the examinable question is always where the boundary should sit for one named service rather than which sector is better in the abstract. Private ownership brings the profit incentive, competition and access to capital markets, which tends to cut unit costs and speed innovation. State ownership brings universal coverage, cross subsidy from profitable to unprofitable users, and control of a natural monopoly where duplicating a network would waste resources. Royal Mail was privatised in 2013 yet kept a universal service obligation precisely because delivery to remote addresses is not commercially attractive. Judge by weighing efficiency gains against equity, the cost of regulating a private monopoly, and who carries the risk when a contractor collapses, as Carillion did.

A sole trader is the business in law, with no separate legal person, no registration beyond notifying HM Revenue and Customs, and profits taxed as personal income. An ordinary partnership spreads that same position across two or more owners under the Partnership Act of 1890 unless a deed says otherwise, which is why a deed setting out profit shares and decision rules matters. Incorporation changes the position entirely: a company registered at Companies House is a separate legal person that owns its assets, signs its own contracts and outlives its founders, governed by articles of association and run by directors for shareholders. A private limited company cannot offer shares to the general public; a public limited company can, but needs allotted share capital of at least fifty thousand pounds and must publish fuller accounts.

Liability answers one question: if the business cannot pay its debts, whose other assets may creditors take. Where it is unlimited the owner and the business are the same legal person, so a sole trader's house and savings are exposed, and ordinary partners are jointly and severally liable, meaning one partner can be pursued for the whole debt when the others cannot pay. Where it is limited, a shareholder's loss is capped at the amount unpaid on the shares held, which is why investors will fund a venture they would never guarantee personally. The decision use is risk taking and finance: the cap makes outside equity possible, but it shifts risk onto suppliers and lenders, who respond with credit checks, shorter payment terms and personal guarantees from directors of small companies.

Each form buys something and gives something up, and examiners reward the trade off rather than the list. A sole trader gets speed, privacy and every pound of profit, and pays in personal exposure, thin finance and no continuity if the owner is ill. A partnership adds capital and specialist skill but splits the profit and binds each partner to the others' decisions. A private limited company buys protection for personal assets, easier borrowing and corporation tax treatment at the price of filing accounts at Companies House and running formal governance. Flotation unlocks large equity finance but invites takeover bids, dilutes founder control and exposes the board to institutional investors pressing for short run dividends, which is why firms such as Morrisons have been taken back into private ownership.

Rank the influences rather than list them, because the weight each carries depends on the stage the firm has reached and on what the owner actually wants. Finance is usually decisive, since a bank or an outside investor will not fund a large expansion on an unincorporated balance sheet. Attitude to risk matters where the venture is capital intensive or exposed to claims. Control matters where a founder will not accept dilution, and tax matters once profits are large enough that corporation tax plus dividends beats income tax on trading profit. Set up cost, disclosure and succession planning follow. Greiner's growth model helps because it predicts a crisis of leadership that pushes informal firms into formal structures, though it is blind to owners who deliberately stay small, and the decision can be revisited later.

These organisations still need a surplus; what differs is that the surplus is reinvested in the mission instead of being distributed to owners, and most carry an asset lock so assets cannot be sold off for private gain. A social enterprise trades commercially for a social purpose, often as a community interest company, as The Big Issue does by selling a magazine that funds support for homeless vendors. A charity must have exclusively charitable purposes, deliver public benefit, register with the Charity Commission and be run by trustees who are usually unpaid, and it gains reliefs such as gift aid. A co-operative is owned by its members and votes one member one vote whatever the shareholding. Registered societies are overseen by the Financial Conduct Authority and serve members or a wider community.

Different groups carry different risk and different voice, and the legal form is what allocates both. Shareholders in an incorporated firm risk only their stake and vote in proportion to their holding; an unincorporated owner risks the family home but answers to nobody. Suppliers and lenders are the mirror image, because once owner losses are capped they carry more of the downside, which is why they run credit checks, shorten payment terms or ask a director for a personal guarantee. Employees may gain security from a company that outlives its founder yet lose influence once institutional investors press for cost cutting, which is the argument made for employee ownership at the John Lewis Partnership. Government and lenders gain transparency from filed accounts. Ask who the form shifts risk onto, and whether that is sustainable.