Appropriateness of Different Forms of Ownership 

Factors affecting the Appropriateness of different forms of ownership 

➔ Growth: Generally, businesses begin small and grow over time. As a business grows, it’s common for it to change its legal status. This is due to the fact that they require additional funding. For example, a sole trader who is having trouble raising capital might form a partnership or a limited company, which allows them to raise capital and offer a variety of options. 

➔ SIze: Small firms are normally referred to as a sole trader or a partnership, whereas public limited companies, which employ thousands of people and generate bigger sales and profits, are classified as large. 

➔ Control: Some business owners, such as sole traders, choose to be self-employed and have complete control over their business. As new partners or shareholders join the company, ownership and control are split among them, and some ownership and control is lost. 

➔ Limited liability: If the business is a limited company, the owners can protect their own financial situation. Because sole traders and partnerships are forced to spend their own money to pay business debts, they have unlimited liability. As a result, some business owners decide to form a limited company to provide them with additional financial protection. 

➔ The need for finance: This is one of the most common reasons for business owners to change their legal status. 

Other factors: will also include how the business plans use their profits, how different stakeholders influence the business. 

Objectives and the Type of Organisation 

➔ Diverse types of business organisations are likely to have different objectives, such as; ➔ Small sole traders may be satisfied with a small profit, just enough to maintain a comfortable living (profit satisfying) 

➔ As family businesses and other medium-sized private limited companies are typically afraid of losing ownership and control to outsiders, they are reluctant to go public, limiting their growth and prioritising other objectives. 

➔ The majority of multinational companies aim to expand. Their goal is frequently to become larger and larger in order to control worldwide markets. McDonald’s, for example.