O Level Business: Types of business organisation and Business objectives and stakeholder objectives (Cambridge 7115) – Revision Notes

These revision notes are for the Cambridge O Level Business Studies 7115 syllabus for examination in 2026, sections 1.4 (Types of business organisation) and 1.5 (Business objectives and stakeholder objectives). The syllabus is not tiered. For full explanations go to the study guide, then test yourself with the practice questions.

Other links: Cambridge O Level Business hub, the printable checklist, and the free 10-minute diagnostics. Money is in dollars and every business named is invented.

1.4 Key terms

Term	Short definition
Ownership	Who owns the business, takes the decisions and receives the profit
Risk	The chance that money is lost
Limited liability	An owner can lose only the amount invested in the business
Unlimited liability	An owner is personally responsible for all business debts
Unincorporated	Business and owner are treated as one: sole traders and partnerships
Limited company	A separate legal entity owned by shareholders
Public corporation	A public sector organisation owned by the government and run by appointed managers

Forms of organisation at a glance

Form	Owners	Liability	Capital from	Key point
Sole trader	One	Unlimited	Owner, loans	Full control, all profit
Partnership	Two or more	Unlimited (usual form)	Partners, loans	Shared skills and capital; may disagree
Private limited company	Shareholders	Limited	Shareholders, loans	Shares not for sale to the public
Public limited company	Shareholders	Limited	Stock exchange sales of shares	Large sums; takeover risk
Franchise	Franchisee owns outlet	Franchisee carries it	Franchisee plus fees paid to franchisor	Borrowed brand, fixed rules
Joint venture	Two or more businesses	As agreed	Partners	Project-based, shared cost and profit
Public corporation	Government	Owned by the state	Government, user charges	Service to the public

Unincorporated versus limited

Point	Unincorporated	Limited company
Legal identity	Same as owner	Separate from owners
Liability	Unlimited	Limited
Capital	Usually small	Usually larger
Control	Owners	Directors answerable to shareholders
Setting up	Quick, cheap	More steps and more costs
Information	Little must be published	More must be reported to shareholders

Strengths and weaknesses

Form	Main strengths	Main weaknesses
Sole trader	Control, keeps all profit, simple	Unlimited liability, little capital, heavy workload
Partnership	More capital and skills, shared workload	Unlimited liability, disputes, profit shared
Private limited company	Limited liability, more capital, owners keep control	More paperwork, shares hard to sell
Public limited company	Very large capital, easy to trade shares	Costly to run, takeover risk, spread control
Franchise	Known brand, support and training	Fees, rules, less freedom
Joint venture	Shared cost, risk and expertise	Shared profit, possible clashes

Method: recommend and justify a form

1. Read the facts and underline clues: capital needed, risk, control wanted, growth plans.
2. Name one form clearly.
3. Link it to a clue and give a reason.
4. Give a drawback or an alternative you rejected.
5. Finish with a short judgement tied to the situation.

Reminder example. Mossop Tiles is a sole trader with sales revenue of 480,000 and costs of 372,000. Profit is 480,000 − 372,000 = 108,000, all of it the owner’s. If two equal partners ran it, each would get 54,000, and the owner would have shared control as well. Profit as a percentage of sales revenue is 108,000 ÷ 480,000 × 100 = 22.5%.

Reminder example on liability. A trader owes 160,000 and the sale of assets raises 95,000. The shortfall is 65,000. As a sole trader the owner could be asked to pay it from personal assets. As a limited company owner who invested 30,000, the loss is limited to 30,000.

Reminder on franchise and joint venture money. A franchisee paying an 8% royalty on sales revenue of 250,000 pays 250,000 × 0.08 = 20,000. A joint venture project costing 90,000 shared 70 : 30 costs the partners 63,000 and 27,000.

1.5 Key terms

Term	Short definition
Objective	A target the business wants to reach
Survival	Staying in business
Growth	Becoming bigger, for example higher sales revenue
Profit	Revenue minus costs
Market share	Share of total market sales: (business sales ÷ total market sales) × 100
Social enterprise	A business whose main aim is social or environmental, with profit mostly reinvested
Stakeholder	A person or group with an interest in the business

Why objectives matter and why they change

• They give direction and allow results to be compared with targets.
• They help managers choose between options and motivate staff.
• Social enterprises add a social or environmental aim and reinvest most profit in it.
• They change when: the business is new or established, the economy weakens or improves, a competitor enters, or owners change what they want.

Reminder: market share and growth can differ. A business whose sales revenue rises from 54,000 to 63,000 has grown by (63,000 − 54,000) ÷ 54,000 × 100 = 16.7% (1 d.p.). If the market rose from 360,000 to 420,000 its share stayed at 15% (54,000 ÷ 360,000 and 63,000 ÷ 420,000).

Stakeholders

Group	Internal or external	Typical objective
Owners and shareholders	Internal	Profit and dividends
Managers	Internal	Pay, status, business success
Employees	Internal	Pay, security, conditions
Customers	External	Quality and value
Suppliers	External	Prompt payment and regular orders
Lenders	External	Loan repaid with interest
Government	External	Tax, jobs, compliance
Local community	External	Jobs, clean surroundings

Conflict pairs to remember

• Shareholders (higher profit) versus employees (higher pay).
• Customers (low prices) versus suppliers (higher prices).
• Community (quiet, clean) versus managers (bigger factory).

Method for a conflict question: name the two groups, state each objective, explain why both cannot be fully met, and where asked say which should come first and why.

Private and public sector objectives

	Private sector	Public sector
Owned by	Individuals or shareholders	Government
Usual main aims	Profit, growth, survival, market share	Service for all, affordable prices, jobs, social aims
Losses	Owners bear them	May be covered by government

Must-know distinctions

• Private limited versus public limited: whether shares can be sold to the general public through a stock exchange.
• Franchise versus joint venture: a franchisee buys the right to use one brand; joint venture partners combine for a project.
• Internal versus external stakeholders: inside or outside the business.
• Social enterprise versus charity-like giving: a social enterprise still sells to cover costs.

Quick self-test

1. Define limited liability.
2. State two differences between a sole trader and a private limited company.
3. Identify the main benefit of a franchise to a franchisee.
4. A firm with sales of 90,000 sits in a market worth 750,000. Calculate its market share.
5. Explain one reason why a new business may prioritise survival.
6. Identify two external stakeholders.
7. Give one example of a conflict between customers and owners.
8. Outline one way a social enterprise differs from a private sector business aimed at profit.
9. State one objective of a public corporation.
10. Justify a partnership for two dentists who want to share equipment costs.

Answers

1. The owner can lose no more than the amount invested, so personal assets are protected.
2. Any two: a sole trader has unlimited liability but a company has limited liability; a sole trader is one owner while a company has shareholders; a sole trader is not a separate legal entity; a company can usually raise more capital.
3. A known brand and proven methods, which lowers the risk of failure.
4. 90,000 ÷ 750,000 × 100 = 12%.
5. In the first years many new businesses lose money and have little cash, so staying open is a priority before growth.
6. Any two from customers, suppliers, lenders, government, local community.
7. Customers want lower prices, while owners want higher prices to make more profit.
8. It puts social or environmental aims first and reinvests most profit, instead of paying it out to owners.
9. Any one: provide a service to everyone, keep prices affordable, protect jobs.
10. The dentists share equipment costs, skills and workload and can raise more capital than one person, which suits a joint practice. The drawback is unlimited liability and possible disagreement, but a written agreement can reduce this.

Where marks are usually lost

• Giving a feature without saying why it matters in the situation.
• Saying “limited liability” protects the business rather than the owner.
• Calling every business with shareholders a public limited company.
• Listing stakeholders with no objective, or objectives with no conflict when the question asks for conflict.
• Recommending a form of organisation without using the facts given.
• Answering “justify” with one side only.
• Using market share and growth as if they mean the same thing.
• Forgetting that public sector bodies can still care about costs.

Frequently asked questions

What is the difference between unincorporated businesses and limited companies? Sole traders and partnerships are unincorporated, so the business and its owners are treated as the same and the owners have unlimited liability. A limited company is a separate legal entity, and its shareholders have limited liability.

Is a public limited company in the public sector? No. A public limited company is a private sector business whose shares can be sold to the general public. The public sector is owned and controlled by the government, for example through public corporations.

Why do business objectives change over time? A new business may aim at survival in its first year, then growth once it is secure, and later profit or market share, as its situation and the market change.

How do private and public sector objectives differ? Private sector enterprises usually aim for profit, growth and market share. Public sector enterprises usually aim to provide a service to everyone, keep prices affordable and protect jobs.

Official syllabus

Cambridge O Level Business Studies 7115 syllabus for examination in 2026, published by Cambridge International Education, sections 1.4.1 and 1.5.1 to 1.5.3.