Types of Business Organisation GCSE Business

Private company limited by guarantee ENSURE YOU DISCUSS THE LIABILITY OF THE COMPANY TYPE Private company limited by guarantee Directors or shareholders financially back the organisation up to a specific amount if things go wrong. Private unlimited company Directors or shareholders are liable for all debts if things go wrong.

Public limited company Companies where shares are traded publicly on a market, like the London Stock Exchange. A public limited company (plc) is usually a large, well-known business. This could be a manufacturer or a chain of retailers with branches in most city centres.

If a company with limited liability is sued, then the accusers are suing the company, not its owners or investors. Most limited companies are ‘limited by shares’. This means that the shareholders’ responsibilities for the company’s debts are limited to the value of shares that they own but haven’t paid for.

Example A company limited by shares issues 100 shares valued at £1 each when it’s set up. Its 2 shareholders own 50 shares each and have both paid in full for 25 of these. If the company goes bust, the maximum the shareholders have to pay towards its outstanding bills is £50 - the value of the remaining 25 shares that they’ve each not paid for. Company directors aren’t personally responsible for debts the business can’t pay if it goes wrong, as long as they haven’t broken the law.

A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of their investment in that company. This usually takes the form of that person's dividends in the company being zero, since the company has no profits to allocate.

Sole proprietors (or sole traders) and partners in general partnerships are each liable for all the debts of the business (unlimited liability).

Two Sectors The economy can be divided into two sectors: The Private Sector The Public Sector

The Private Sector Private individuals and firms that are owned by private individuals Firms in the private sector include: Sole Traders Private Limited Companies (Ltd) Partnerships Public Limited Companies (PLC)

The Public Sector Made up of central government, local government, and businesses that are owned by government In the last twenty years the number of government-owned firms in the UK has shrunk massively Now, very few examples remain: for instance, the Royal Mail

Private Sector Firms One of the key differences is between: Sole traders and partnerships whose liability is unlimited And Private Limited and Public Limited Companies, who have ‘limited liability’

Other Business Types Co-operatives are owned by their staff, who are ‘members’ of the firm Profits are shared amongst the members Losses too must be shared

Franchises Many businesses today are franchises A business idea is licensed to a franchisee The owners of the brand receive a license fee The franchisee gains the right to use the business brand

Not For Profit Businesses Many charity-based business organisations are run as ‘not for profit’ operations They typically receive donations or funds from groups or government Any financial surplus is ploughed back into the business The organisation does not aim to generate profits