Source: https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-2-2-limited-liability [Revision notes](https://senecalearning.com/en-gb/revision-notes.md) › [IB Diploma](https://senecalearning.com/en-gb/revision-notes/ib-diploma.md) › [Business](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business.md) › [Business Management: IB Diploma](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma.md) › Limited Liability # Limited Liability Business Management: IB Diploma, topic 1.2.2 ## Types of Ownership - Private Limited Companies Private limited companies (Ltds) are companies where ownership of shares is restricted. For the company to sell shares, all the current shareholders must agree to sell them. These companies have Ltd. after their name. ### Advantages ![Advantages](https://image-v2.cdn.app.senecalearning.com/2018-03/33ea6915-af6d-42ed-acfd-fead3eea679a/shutterstock_631311128.jpg) - The key advantage over sole traders and partnerships is that shareholders have limited liability. - The fact that ownership is restricted means that all shareholders must agree to sell shares. This means that the owners retain (keep) a lot of control over how the business is managed. - It is normally easier for a limited company to get a loan than it is for partnerships, as a company is normally seen as less risky. This should increase a company’s access to finance. ### Disadvantages ![Disadvantages](https://image-v2.cdn.app.senecalearning.com/2018-03/05efed0d-e0a2-4cb0-94da-5d838f309a13/shutterstock_565947739.jpg) - Finance is needed to incorporate a business. There is an upfront fee as well as costs associated with paperwork. This means that it may not be possible for smaller firms (or brand new firms). - Unlike sole traders and partnerships, the company is legally obliged to publish their accounts each year and competitors may use these to become more competitive. ## Types of Ownership - Public Limited Companies Public limited companies sell shares on the stock exchange. This means that anybody over 18 can buy shares (often through brokers). Firms often become public companies when they want to expand because selling shares on the stock exchange allows them to raise finance for investment. In 2017, Snapchat went through this process (which is called a flotation). ### Advantages ![Advantages](https://image-v2.cdn.app.senecalearning.com/2018-03/79745ba8-d526-472e-83cc-163b0d72cf35/shutterstock_184487681.jpg) - Selling shares on a stock exchange allows companies to raise money for investment, which enables the company to grow faster or bigger. - It is much easier for companies to raise capital (money) from banks if they are public limited companies because they present less of a risk (given the number and size of investors). - Shareholders have limited liability because the company is incorporated. ### Disadvantages ![Disadvantages](https://image-v2.cdn.app.senecalearning.com/2018-03/2c7e7da0-ccb1-4af1-a5a3-4edc89a75e2a/shutterstock_565947739.jpg) - Owners often have very little say over how the business is run. This means that it can be hard to agree on how the business is run. - Anyone can take over the company if they are able to buy enough shares. When shareholders own more than half the shares, then they will have control over the company. - The company’s accounts must be made public. This means that competitors can see how well the company is doing. ## Test yourself on Limited Liability - Which type of company would find it easiest to get a loan? - Which suffix follows the name of a private limited company? - Public limited companies - Topshop shares are not available for purchase by the public. What type of limited company is Topshop? [Practise this topic for free](https://app.senecalearning.com/classroom/course/96f95cf2-8acd-4f01-87ce-ad02d9a86dab/section/2efa2476-8804-4af1-a40c-40e15f163309/session) - Previous topic: [1.2.1 Sole Traders](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-2-1-sole-traders.md) - Next topic: [1.2.3 Non-Profit](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-2-3-non-profit.md) ## Business Management: IB Diploma contents ### 1 Business Organisation & Environment - 1.1 Introduction to Business Management - [1.1.1 Why Businesses Exist & Sectors](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-1-1-why-businesses-exist-and-sectors.md) - 1.2 Types of Organisation - [1.2.1 Sole Traders](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-2-1-sole-traders.md) - [1.2.2 Limited Liability](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-2-2-limited-liability.md) - [1.2.3 Non-Profit](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-2-3-non-profit.md) - [1.2.4 Franchising](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-2-4-franchising.md) - [1.2.5 End of Topic Test - Franchising](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-2-5-end-of-topic-test-franchising.md) - 1.3 Organisational Objectives - [1.3.1 External Environments](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-3-1-external-environments.md) - [1.3.2 Business Mission & Corporate Objective](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-3-2-business-mission-and-corporate-objective.md) - [1.3.3 Mission, Corporate Objectives & Strategy](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-3-3-mission-corporate-objectives-and-strategy.md) - [1.3.4 SWOT Analysis](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-3-4-swot-analysis.md) - [1.3.5 End of Topic Test - SWOT Analysis](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-3-5-end-of-topic-test-swot-analysis.md) - 1.4 Stakeholders - [1.4.1 Stakeholders](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-4-1-stakeholders.md) - 1.5 External Environment - [1.5.1 Social & Technological Environment](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-5-1-social-and-technological-environment.md) - [1.5.2 Lifestyle & Technological Environment](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-5-2-lifestyle-and-technological-environment.md) - [1.5.3 Corporate Social Responsibility](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-5-3-corporate-social-responsibility.md) - [1.5.4 Economic Environment](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-5-4-economic-environment.md) - [1.5.5 Political & Legal Change](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-5-5-political-and-legal-change.md) - 1.6 Growth & Evolution - [1.6.1 Growth & Retrenchment](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-1-growth-and-retrenchment.md) - [1.6.2 Challenges of Growth](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-2-challenges-of-growth.md) - [1.6.3 Growth Models](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-3-growth-models.md) - [1.6.4 End of Topic Test - Diseconomies of Scale](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-4-end-of-topic-test-diseconomies-of-scale.md) - [1.6.5 Internationalisation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-5-internationalisation.md) - [1.6.6 Sourcing Resources & Entering Markets](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-6-sourcing-resources-and-entering-markets.md) - [1.6.7 End of Topic Test - Internationalisation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-7-end-of-topic-test-internationalisation.md) - [1.6.8 Managing Internationalisation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-8-managing-internationalisation.md) - [1.6.9 Impact of Internationalisation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-6-9-impact-of-internationalisation.md) - 1.7 HL Only: Organisational Planning Tools - [1.7.1 Organisational Planning Tools](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/1-7-1-organisational-planning-tools.md) ### 2 Human Resource Management - 2.1 Functions & Evolution of Human Resource Management - [2.1.1 Setting Human Resource Objectives](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-1-1-setting-human-resource-objectives.md) - [2.1.2 Human Resource Management](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-1-2-human-resource-management.md) - [2.1.3 Labour Turnover & Retention](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-1-3-labour-turnover-and-retention.md) - [2.1.4 Labour Productivity](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-1-4-labour-productivity.md) - 2.2 Organisational Structure - [2.2.1 Organisational Structures](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-2-1-organisational-structures.md) - 2.3 Leadership & Management - [2.3.1 Managers](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-3-1-managers.md) - [2.3.2 Management Theories](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-3-2-management-theories.md) - [2.3.3 End of Topic Test - Management](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-3-3-end-of-topic-test-management.md) - 2.4 Motivation - [2.4.1 Motivating & Engaging Employees](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-4-1-motivating-and-engaging-employees.md) - [2.4.2 Taylor's Theory](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-4-2-taylors-theory.md) - [2.4.3 Maslow's Theory](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-4-3-maslows-theory.md) - [2.4.4 Herzberg's Theory](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-4-4-herzbergs-theory.md) - [2.4.5 Different Incentives](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-4-5-different-incentives.md) - [2.4.6 Evaluating Incentives](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-4-6-evaluating-incentives.md) - 2.5 Organisational (Corporate) Culture - [2.5.1 Managing Organisational Culture](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-5-1-managing-organisational-culture.md) - [2.5.2 Organisational Structures](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-5-2-organisational-structures.md) - 2.6 HL Only: Industrial/Employee Relations - [2.6.1 Improving Employer-Employee Relations](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-6-1-improving-employer-employee-relations.md) - [2.6.2 Case Study - The Winter of Discontent](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/2-6-2-case-study-the-winter-of-discontent.md) ### 3 Finance & Accounts - 3.1 Sources of Finance - [3.1.1 Internal Sources of Finance](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-1-1-internal-sources-of-finance.md) - [3.1.2 External Sources of Finance](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-1-2-external-sources-of-finance.md) - [3.1.3 Factors for Financing](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-1-3-factors-for-financing.md) - [3.1.4 End of Topic Test - Debt](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-1-4-end-of-topic-test-debt.md) - 3.2 Costs & Revenues - [3.2.1 Costs & Revenues](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-2-1-costs-and-revenues.md) - 3.3 Break-Even Analysis - [3.3.1 Profit](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-3-1-profit.md) - [3.3.2 Break-Even Analysis](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-3-2-break-even-analysis.md) - 3.4 Profitability & Liquidity Ratio Analysis - [3.4.1 Profitability Analysis](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-4-1-profitability-analysis.md) - 3.5 Cash Flow - [3.5.1 Cash Flow](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-5-1-cash-flow.md) - [3.5.2 Solutions to Cash Flow Problems](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-5-2-solutions-to-cash-flow-problems.md) - [3.5.3 Improving Cash Flow & Profits](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-5-3-improving-cash-flow-and-profits.md) - 3.6 HL Only: Investment Appraisal - [3.6.1 Investment Appraisal](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-6-1-investment-appraisal.md) - 3.7 HL Only: Budgets - [3.7.1 Cash-Flow & Budgets](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/3-7-1-cash-flow-and-budgets.md) ### 4 Marketing - 4.1 The Role of Marketing - [4.1.1 Setting Marketing Objectives](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-1-1-setting-marketing-objectives.md) - [4.1.2 Market Calculations](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-1-2-market-calculations.md) - 4.2 Marketing Planning - [4.2.1 Marketing Mix](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-2-1-marketing-mix.md) - [4.2.2 Segmentation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-2-2-segmentation.md) - [4.2.3 Niche & Mass Markets](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-2-3-niche-and-mass-markets.md) - 4.3 Market Research - [4.3.1 Market Research](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-3-1-market-research.md) - [4.3.2 Market Mapping](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-3-2-market-mapping.md) - [4.3.3 Methods of Market Research](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-3-3-methods-of-market-research.md) - 4.4 The 4 Ps - [4.4.1 Product Decisions](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-1-product-decisions.md) - [4.4.2 Pricing Decisions & Price Skimming](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-2-pricing-decisions-and-price-skimming.md) - [4.4.3 Pricing Decisions & Price Penetration](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-3-pricing-decisions-and-price-penetration.md) - [4.4.4 End of Topic Test - Pricing & Competition](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-4-end-of-topic-test-pricing-and-competition.md) - [4.4.5 Promotional Decisions](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-5-promotional-decisions.md) - [4.4.6 Promotional Decisions 2](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-6-promotional-decisions-2.md) - [4.4.7 Promotional Decisions 3](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-7-promotional-decisions-3.md) - [4.4.8 Digital Marketing](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-8-digital-marketing.md) - [4.4.9 Evaluating Digital Marketing](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-9-evaluating-digital-marketing.md) - [4.4.10 Case Study - The Marketing Mix & Promotion](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-10-case-study-the-marketing-mix-and-promotion.md) - [4.4.11 Place & Distribution](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-4-11-place-and-distribution.md) - 4.5 HL Only: The Extended Marketing Mix - [4.5.1 The Extended Marketing Mix](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-5-1-the-extended-marketing-mix.md) - 4.6 HL Only: International Marketing - [4.6.1 International Marketing](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-6-1-international-marketing.md) - 4.7 E-Commerce - [4.7.1 E-Commerce](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/4-7-1-e-commerce.md) ### 5 Operations Management - 5.1 The Role of Operations Management - [5.1.1 Setting Operational Objectives](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-1-1-setting-operational-objectives.md) - 5.2 Production Methods - [5.2.1 Production Processes Overview](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-2-1-production-processes-overview.md) - [5.2.2 Production Processes](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-2-2-production-processes.md) - [5.2.3 Production Efficiency](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-2-3-production-efficiency.md) - [5.2.4 Technology & Production](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-2-4-technology-and-production.md) - 5.3 HL Only: Lean Prodution & Quality Management - [5.3.1 Importance of Quality](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-3-1-importance-of-quality.md) - [5.3.2 Measuring & Identifying Quality](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-3-2-measuring-and-identifying-quality.md) - [5.3.3 Total Quality Management](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-3-3-total-quality-management.md) - [5.3.4 Evaluating Total Quality Management](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-3-4-evaluating-total-quality-management.md) - [5.3.5 Case Study - Toyota Production System](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-3-5-case-study-toyota-production-system.md) - 5.4 HL Only: Production Planning - [5.4.1 Capacity](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-4-1-capacity.md) - [5.4.2 Productivity & Efficiency](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-4-2-productivity-and-efficiency.md) - [5.4.3 Technology & Efficiency](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-4-3-technology-and-efficiency.md) - [5.4.4 Improving the Supply Chain](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-4-4-improving-the-supply-chain.md) - [5.4.5 Inventory](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-4-5-inventory.md) - [5.4.6 Outsourcing](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-4-6-outsourcing.md) - 5.5 HL Only: Research & Development - [5.5.1 Organisational Planning Tools](https://senecalearning.com/en-gb/revision-notes/ib-diploma/business/business-management-ib-diploma/5-5-1-organisational-planning-tools.md)