WASSCE Economics · The Firm
Firms, industries and types of business organisation
By the WASSCE Tutor team
Updated 12 November 2026 · 10 min read · Prepared against the WASSCE syllabus.
A woman frying akara at a roadside stall and a mobile-phone company with millions of customers are both firms. They differ in who owns them, who bears the risk and how they raise money. This lesson compares the main types of business organisation tested in WASSCE.
Learning objectives
By the end of this lesson you should be able to:
- define a firm, a plant and an industry
- state the objectives of firms
- compare the main types of business organisation and their advantages and disadvantages
- explain privatisation and commercialisation, with their merits and demerits
Firm, plant and industry
- A firm is a business unit that organises factors of production to produce goods or services, usually for profit. Example: a bakery company.
- A plant is a single place of production: a factory, workshop or mine. One firm may own several plants.
- An industry is a group of firms producing similar goods. Example: all the bakeries in a country form the baking industry.
Objectives of firms
- Profit maximisation: the main aim in economic theory.
- Sales or revenue maximisation: to win a bigger share of the market.
- Growth: to expand and become more secure.
- Survival: especially for new or small firms.
- Providing a service: the main aim of public corporations and cooperatives.
Types of business organisation
Sole proprietorship
A sole proprietorship (sole trader) is a business owned and controlled by one person, who takes all the profit and bears all the risk.
| Advantages | Disadvantages |
|---|---|
| Easy and cheap to start | Unlimited liability: the owner's personal property can be taken to pay business debts |
| Owner makes quick decisions | Limited capital |
| Owner keeps all the profit | Long working hours, no one to share the work |
| Close contact with customers | The business may end when the owner dies or falls ill |
Examples: a provision shop, a tailor, a barber, a market trader.
Partnership
A partnership is a business owned by two or more people (usually 2 to 20) who agree to share capital, work, profits and losses, often under a written deed of partnership.
| Advantages | Disadvantages |
|---|---|
| More capital than a sole trader | Unlimited liability for ordinary partners |
| Partners share work and bring different skills | Disagreements between partners |
| Losses are shared | Profits must be shared |
| The partnership may end on the death or withdrawal of a partner |
Examples: law firms, accounting firms, medical practices. A sleeping (dormant) partner contributes capital but takes no part in running the business.
Joint-stock (limited liability) companies
A joint-stock company is a business owned by shareholders, who contribute capital by buying shares. It is a separate legal entity from its owners, and the shareholders have limited liability: they can lose only what they paid for their shares.
| Private limited company (Ltd) | Public limited company (Plc) |
|---|---|
| Shares cannot be sold to the general public | Shares can be sold to the general public |
| Usually a small number of shareholders | Many shareholders |
| Less capital | Can raise very large capital |
Advantages: limited liability; large capital; continuity (the company continues even if shareholders die); professional managers. Disadvantages: expensive and slow to form; accounts must be published; separation of ownership and control (managers may not act in shareholders' interests); decisions can be slow.
Cooperatives
A cooperative society is a business owned and run by its members for their mutual benefit, with each member having one vote regardless of shares held.
| Type | Purpose |
|---|---|
| Producers' cooperative | Farmers pool resources to buy inputs and market crops |
| Consumers' cooperative | Members buy goods in bulk and sell to themselves cheaply |
| Credit and thrift (savings) cooperative | Members save together and lend to each other |
Rice and cocoa farmers in rural Sierra Leone often form cooperatives to buy seed and fertiliser in bulk, share processing machines and sell their crops at better prices than each could get alone.
Public corporations (public enterprises)
A public corporation is a business owned and controlled by the government, set up by law to provide an essential service. It is run by a board appointed by the government.
Examples in Sierra Leone: Guma Valley Water Company (water supply in Freetown) and EDSA, the Electricity Distribution and Supply Authority.
Reasons for public corporations: to provide essential services, to avoid private monopolies exploiting consumers, to provide services private firms find unprofitable, and for national security. Problems: inefficiency, political interference, losses that must be covered by taxpayers, and poor service.
A public limited company (Plc) is privately owned by shareholders: "public" means its shares are sold to the public. A public corporation is owned by the government. Do not mix them up.
The types compared
| Type | Owners | Liability | Capital from | Continuity | Example |
|---|---|---|---|---|---|
| Sole proprietorship | One person | Unlimited | Owner's savings, loans | Ends with the owner | A provision shop |
| Partnership | 2 to 20 partners | Unlimited (except limited partners) | Partners' contributions | Ends if a partner dies or leaves, unless agreed | A law or accounting firm |
| Private limited company (Ltd) | Shareholders (shares not sold to the public) | Limited | Sale of shares to members, loans | Continues | A family transport firm |
| Public limited company (Plc) | Shareholders (shares sold to the public) | Limited | Sale of shares to the public, debentures | Continues | A bank listed on the stock exchange |
| Cooperative | Members (one member, one vote) | Usually limited | Members' contributions | Continues | A farmers' or traders' cooperative |
| Public corporation | The government | Not applicable | Government funds, borrowing | Continues | A state water or electricity company |
Privatisation and commercialisation
- Privatisation is the transfer of ownership of a public enterprise, wholly or partly, from the government to private individuals or firms, usually by selling its shares.
- Commercialisation keeps the enterprise in government ownership but requires it to be run like a business: charge prices that cover its costs, make a profit where possible and stop relying on government subsidies.
| Privatisation | Commercialisation | |
|---|---|---|
| Who owns it afterwards | Private shareholders | The government |
| Main aim | Efficiency through private ownership and competition | Efficiency and self-financing under public ownership |
| Source of funds | Private capital | Its own revenue |
Reasons (merits):
- To improve efficiency and the quality of service, since private owners and commercial managers face pressure to cut waste.
- To reduce the burden on the government budget, which no longer has to cover losses.
- To raise revenue for the government from the sale of shares.
- To reduce political interference in day-to-day management.
- To widen ownership by letting citizens buy shares.
- To attract private and foreign investment and new technology.
Demerits:
- Higher prices, as the enterprise starts charging the full cost of its service.
- Job losses, as new owners cut staff to reduce costs.
- A public monopoly may become a private monopoly that exploits consumers.
- Essential services may be withdrawn from poor or remote areas where they do not pay.
- Key enterprises may pass to foreign owners.
Sierra Leone set up the National Commission for Privatisation (NCP) in 2002 to manage the reform of its public enterprises, including selling some and commercialising others. Debates about water and electricity tariffs are, at heart, debates about how commercially these services should be run.
Key points
- Firm = business unit; plant = place of production; industry = group of firms making similar goods.
- Sole traders and partners have unlimited liability; company shareholders have limited liability.
- Cooperatives: one member, one vote, mutual benefit. Public corporations: government-owned, service-oriented.
- Privatisation transfers ownership to the private sector; commercialisation keeps public ownership but runs the enterprise on business lines.
WASSCE examination focus
Expect to distinguish a firm from an industry, to compare two types of business organisation (for example a sole proprietorship and a partnership) and to explain limited liability. In comparison questions, use a two-column table or matched points, so each difference is clear.
Quick check
- What is the difference between a firm and an industry?
- Why do shareholders of a limited company not lose their houses if the company fails?
- Is a Plc owned by the government? Explain.
- Give two reasons why a government might privatise a public corporation.
Answers: 1. A firm is a single business unit; an industry is all the firms producing similar goods. 2. They have limited liability: they can lose only the amount paid for their shares. 3. No. A Plc is owned by private shareholders; "public" means its shares can be bought by the public. 4. Any two: to improve efficiency, to reduce the burden of losses on the budget, to raise revenue from selling shares, to reduce political interference, to attract investment.
Keep going with the firm
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