The legal form a business chooses decides who owns it, who bears the risk and who gets the profit. This page covers every form in AQA 3.1.2 and shows how to use them in an answer.
Do I need to know the difference between Ltd and plc, or is 'limited liability' enough?
A form of business is the legal structure of ownership. Sole traders have unlimited liability and full control. Ltd and plc companies have limited liability, but only a plc can sell shares to the public. Co-operatives and social enterprises put members or social aims first, so profit is shared or reinvested.
Year 12 (7137/7138): This is AS content (AS is the first-year qualification) and also A-level content, so you need all five forms. Expect Define and Explain questions at AS, then Analyse, Assess and Evaluate. Learn each form's ownership, liability, control and profit. Then practise applying them to a case study.
Year 13 (7132, June 2027): Your course covered sole traders, private limited companies and public limited companies under section 3.1. Use this page to fill gaps on co-operatives (worker, consumer, producer) and social enterprises, which your papers may test less directly. Treat the evaluation points as revision for any question on ownership, finance or objectives.
AQA 3.1.2 asks you to know five forms of business: sole traders, private limited companies (Ltd), public limited companies (plc), co-operatives and social enterprises.[0] A form of business is the legal structure that decides who owns the firm and who is responsible for its debts.
A sole trader is one person who owns and runs the business. The owner keeps all the profit and takes all the decisions. The business has no separate legal identity, so the owner has unlimited liability. This means the owner's personal assets, such as a car or home, can be used to pay business debts.
A Ltd is a company with its own legal identity, separate from its owners. Its owners are shareholders, and they have limited liability. This means they can lose only the money they invested. Shares cannot be sold to the general public. They are usually sold privately, so the original owners keep control. Ltd companies file accounts with Companies House, the UK register of companies.
A plc also has limited liability and its own legal identity. It can offer shares to the public, usually through a stock exchange such as the London Stock Exchange. This raises large sums of money, so plcs can grow fast. The cost is less control, because new shareholders can vote. Plcs also face stricter reporting rules and the risk of a takeover.
A co-operative is owned and run by its members, usually on a one member, one vote basis. The type depends on who the members are.
A social enterprise trades to meet a social or environmental aim. It reinvests most of its profit in that aim rather than paying it to owners. It can take several legal forms, such as a community interest company (CIC), a company set up for community benefit.
| Form | Liability | Who owns it | Profit goes to |
|---|---|---|---|
| Sole trader | Unlimited | One person | The owner |
| Ltd | Limited | Private shareholders | Shareholders, as dividends |
| plc | Limited | Public shareholders | Shareholders, as dividends |
| Co-operative | Usually limited | Members | Members, or reinvested |
| Social enterprise | Depends on legal form | Depends on legal form | Mostly reinvested in the social aim |
Illustrative figures: a sole trader's business collapses owing £80,000, and its assets sell for £50,000. The £30,000 shortfall can be taken from the owner's personal savings. If the same firm were a Ltd, the shareholder who invested £10,000 would lose that £10,000 and nothing more. This is why limited liability lowers the risk of starting up.
Annex 8 of the specification lists sophisticated concepts. This topic contains no named model or formula, so the marks come from accurate use of terms such as limited liability and from sound application.[0]
The form of business is not only a legal label. It decides who can vote, who receives profit and how easily the firm can raise money.
The Co-op Group is a consumer co-operative. It says it is owned by more than 5 million members, who vote on a one member, one vote basis.[1] So a shopper has a say in how the business is run. The same structure means profit is managed for members, not for outside investors.
The John Lewis Partnership shows that labels can blur. It is a plc, but a trust holds its shares on behalf of its employees, who are called Partners.[4] It calls itself the UK's largest employee-owned business.[3] It is not a worker co-operative in the legal sense, but it shares the idea of worker ownership.
Use these examples to support a point about control, not just to describe the firm. In an exam, link the form to the case study. A sole trader short of cash has few ways to raise finance, so growth is slow. A plc can sell shares, so growth is faster but control is shared.
A good judgement says which form suits this business at this time. It rests on four things.
Time matters too. A firm may start as a sole trader, become a Ltd as it grows and later float as a plc. So the right form can change as the business changes.
Costs also differ. Companies must file accounts, so competitors can see their results. A sole trader keeps more privacy, but gives up limited liability.
For 9 and 15 mark questions, avoid listing features. Pick the feature that matters in the case, then explain the effect on the business. Finish with a judgement because AO4 (evaluation) carries marks.
Every AQA Business question uses one of five command words, each with a fixed mark tariff, and quantitative questions sit inside the 9 and 15-mark formats. The A-level papers have no 2 or 4-mark questions. Open each format to see how this topic appears in it. All questions here are original Curriculum Circle practice questions, not board questions.
On this topicAsks for the meaning of a term such as limited liability, sole trader or social enterprise.
What earns the marksAO1 only: a precise definition earns both marks.
CC practice questionDefine 'limited liability'. (2 marks)
On this topicAsks why a feature of a form matters to a named business, using the case details.
What earns the marksAO1 for the term, and AO2 for linking it to the business in the case.
CC practice questionExplain one advantage to Maya, who runs a garden-design business, of being a sole trader. (4 marks)
On this topicAsks for a developed chain of reasoning about the effect of a form on a business.
What earns the marksAO1, AO2 and AO3: knowledge, application and a chain such as limited liability, so lower risk, so more willingness to expand.
CC practice questionAnalyse one reason why the owners of Brindle Bikes might convert from a sole trader to a private limited company. (6 marks)
On this topicAsks for arguments for and against a form, then a judgement on which matters more.
What earns the marksAO1 to AO4: both sides in context, then a supported judgement.
CC practice questionAssess the benefits to a family bakery of becoming a public limited company. (9 marks)
On this topicAsks you to compare two options, such as staying a Ltd or becoming a plc, and recommend one.
What earns the marksAO1 to AO4: analysis of both options, a clear recommendation and justification that depends on the case.
CC practice questionEvaluate whether Orchard Foods, a growing private limited company, should become a plc or remain a Ltd. (15 marks)
On this topicUses figures in the case, such as profit, share capital or dividends, to support a point about the chosen form.
What earns the marksAO1 to AO4: correct use of the numbers inside an argument, then a judgement.
CC practice questionOrchard Foods made an operating profit of £600,000 and raised £2m from a share issue. Assess whether this suggests it should become a plc. (9 marks)
| Weight | What it is | What it means on forms of business | |
|---|---|---|---|
| AO1 | 32.5% AS · 24.44% A-level | Knowledge and understanding of terms, concepts, theories, methods and models | Know the five forms and define liability, ownership and the three types of co-operative accurately. |
| AO2 | 27.5% AS · 24.44% A-level | Application to the business context in the case study | Link the form to the case: its size, risk, finance needs and aims. |
| AO3 | 20% AS · 26.66% A-level | Analysis of issues and their impact on individuals and organisations | Build chains: limited liability, so lower personal risk, so more willingness to expand. |
| AO4 | 20% AS · 24.44% A-level | Evaluation of quantitative and qualitative information to make judgements | Judge which form suits this business, and say what the answer depends on, such as growth plans or the need for control. |
Weightings are approximate and taken from the AQA AS 7137 and A-level 7138 specification [0].
Evaluate whether Orchard Foods, a growing private limited company, should become a plc or remain a Ltd. (15 marks)
Becoming a plc lets Orchard Foods sell shares to the public, so it can raise large sums. This matters because it wants to open new factories, and bank loans alone would raise its interest costs. More finance means faster growth, so sales and market share could rise. A Ltd cannot offer shares to the public, so it would rely on existing owners or borrowing.
However, the founders would lose control, because new shareholders can vote and a takeover becomes possible. The plc must also publish more information, which costs money. The decision depends on how much finance the expansion needs and on how much the owners value control. If the expansion is large, a plc is the better choice, because the extra finance outweighs the loss of control. If growth could be funded by profit and a loan, remaining a Ltd is wiser.
As of 2026, the Co-op Group describes itself as one of the world's largest consumer co-operatives, owned by more than 5 million members. Anyone can join by buying a £1 share, and each member has one vote.[1]
Central England Co-operative, trading as OurCoop, is a regional consumer co-operative that trades from over 500 sites. Its members can stand for election to the board and share in the society's profits.[2]
As of 2026, the John Lewis Partnership describes itself as the UK's largest employee-owned business, and its employees are called Partners.[3] It is a public limited company whose shares are held by a trust on behalf of its employees.[4]
Everything above is the topic page. The pieces below take it further. Each one trains a particular assessment objective rather than covering the topic again, and they are added over the year.
Figures and facts were checked against these sources on 2 November 2026. Worked numbers labelled "Illustrative figures" are invented for teaching.
The CC Business revision platform has more practice on this topic, and the Inner Academy's recorded lessons walk through full 15-mark answers.
See the Business platformThe Inner Academy