Each ownership form answers four questions differently: who owns, who controls, who bears the loss, and how money is raised. One table covers them all.
This lesson is part of SPM Business purpose and ownership. It follows distinguishing profit and non-profit objectives.
What does the comparison table show?
| Form | Owners | Control | Liability | Raising money |
|---|---|---|---|---|
| Sole proprietorship | One person | The owner decides alone | Unlimited | Owner’s savings, loans |
| Partnership | Two or more | Partners share decisions | Generally unlimited | Partners’ contributions, loans |
| Private limited company | Shareholders | Directors run it | Limited | Shares sold to chosen people, loans |
| Public limited company | Shareholders | Directors run it | Limited | Shares offered to the public, loans |
| Cooperative | Members | Members vote | Usually limited | Member fees and shares |
Check the exact wording in your textbook, because books may label features slightly differently.
How does liability work in numbers?
Two fictional businesses each lose RM50 000 and owe that to a supplier. The owners have put in RM10 000 each.
Hafiz runs a sole proprietorship. With unlimited liability, he may have to cover the full RM50 000, including from personal assets such as savings beyond the RM10 000 he invested.
Mei Ling owns a private limited company with limited liability. Her loss is generally limited to the RM10 000 she invested, and the company owes the rest.
The difference in risk is RM50 000 − RM10 000 = RM40 000 of exposure that Hafiz may face and Mei Ling generally does not.
What does an applied comparison sound like?
A list says, “A sole proprietorship has unlimited liability.” An applied comparison says, “Hafiz risks personal assets because a sole proprietorship has unlimited liability, while Mei Ling’s loss is limited to her RM10 000. The company form involves more paperwork to set up, but it protects her savings.”
The second answer states a case fact, a feature and a trade-off. Set-up costs and rules can change, so check current details on the official source.
Which mistakes cost marks?
- Saying a partnership has limited liability without a reason.
- Mixing up private and public limited companies.
- Writing features with no link to the owner in the case.
Check yourself
Name the form: (a) one owner who decides everything and risks personal assets, (b) owners who buy shares offered to the general public.
Answer
(a) Sole proprietorship: one owner, full control, unlimited liability. (b) Public limited company: shares are offered to the public, so members of the public can own shares.
What to study next
Practise deciding in choosing a form for a fictional scenario, then use the practice set.
If you want a teacher to quiz you on the table, see online one-to-one Business tuition.