Group Leader : Albert Chau 周殷健

Group Members : Dicky Kwan Sam Cheung Tommy Poon Adam Yip

Economics Chapter 6 Types of business ownership

6.1 Public enterprise What is a public enterprise? It is owned by the government or the state It is government department ( public enterprise ) or public corporation

6.1 Public enterprise Advantages : It is easier to obtain information from the government. It is useful in decision marking It is easier to carry out long term project It is easier to raise capital for expansion because it is financially supported by the government

6.1 Public enterprise Disadvantages : It may be too large. It may suffer from diseconomies of scale There is less competition and less incentive for improvement Civil servants are over-cautious. They have less incentive to improve

6.2 Private enterprise What is private enterprise? It is owned by private individuals. It aim is profit making.

6.2 Private enterprise

6.2 Private enterprise Advantages : The private enterprises are profit maximizing. So they try to reduce the cost for the efficient operation The management of the private enterprises is more flexible. So they are more responsive to the changing demand

6.2 Private enterprise Disadvantages : The private enterprises may not have adequate capital for expansion The private enterprises are profit maximizing. They may do something against the public interest ( e.g. polluting the environment )

6.3 Sole proprietorship What is sole proprietorship? It is owned by a single owner The owner has unlimited liability It is not a legal entity The continuity of the business is not guarantee of the owner dies or retires

6.3 Sole proprietorship Advantages : It is financially easy and legally simple to start the business There is no legal requirement to disclose the financial statements to the public The management of the firm is more flexible. It is more responsive to the changing demand

6.3 Sole proprietorship Disadvantages : The owner has unlimited liability The sources of the capital are limited The continuity of the business is not guaranteed if the owner dies or retires

6.4 Partnership What is partnership? 2-20 partners ( owners ) The partners have unlimited liability The partnership is not a legal entity There is no legal requirement to disclose the financial statement to the public

6.4 Partnership Advantages : ( compared with sole proprietorship ) The sources of capital are wider for the partnership because there are more owners Consultation among the partners may lead to a better decision because they have different professional knowledge

6.4 Partnership Advantages : ( compared with the public limited company ) There is no legal requirement for the partnership to disclose the financial statements to the public It is financially easy and legally simple to start the business of the partnership

6.4 Partnership Disadvantages : ( compared with the sole proprietorship ) Partners have greater risk because if one of the partners makes decisions for the firm, the decisions are legally binding on all other partners There may be conflicts among the partners. This may delay the decision making

6.4 Partnership Disadvantages : ( compared with the public limited company ) Partners have greater risk because if one of the partners makes decisions for the firms, the decisions are legally binding on all other partners The partners have unlimited liability

6.5 Limited company Advantages : The shareholders have limited liability It may have wider scope for raising capital in order to expand the size of the firm. It can enjoy the economies of scale The continuity of the business is guaranteed even if one of the shareholders dies or transfers the ownership

6.5 Limited company Disadvantages : It takes a long time and is usually expensive to start the business The firm ’ s structure of the limited company is usually more complex. The management may be less flexible. This may delay the decision making process

6.5 Limited company Private limited company The no. of shareholders is 2-50 Can not issue the shares and debentures to the public No legal requirement to disclose the financial statements to the public Public limited company The no. of shareholders is 2-infinity Can issue the shares and debentures to the public Legal requirement to disclose the financial statements to the public