MIXED ECONOMY

A market economy primarily based on private enterprise where the government, however, plays an important role in regulating the system as a whole by its choices of economic policy and by providing some essential services.

Although private sector firms predominate, both private and public enterprises are important for the economic and social development of the country.

The most important types of private business units in the United Kingdom are:

sole proprietors or sole trader

partnerships

limited companies

cooperative societies

A sole proprietor -or sole trader-

is a person who owns and runs a business for himself

This type of business organization still represents a large number of concerns in farming and retail trade.

It has the following main characteristics:

a single person -the sole proprietor – owns the business and therefore bears all the risks and any losses; a single person -the sole proprietor – owns the business and therefore bears all the risks and any losses;

he also receives all the profits; he also receives all the profits;

he provides all the finance which forms the capital of the business; he provides all the finance which forms the capital of the business;

he has full control of the enterprise he has full control of the enterprise

Businesses of this kind are often rather small at the start, but many subsequently develop into big firms.

A partnership

is an association of individuals engaged in business.

The minimum number of people is obviously two, and the maximum number is generally limited to twenty.

Compared to sole traders:

ADVANTAGES More owners can provide more finance More owners can provide more finance risks are shared among partners risks are shared among partners

DISADVANTAGES profits are shared among partners profits are shared among partners no single partner has full control or policy- making powers no single partner has full control or policy- making powers

When a partnership is formed, a document called a partnership agreement – or articles of partnership – is normally drawn up.

It contains all the necessary information about the partnership.

for example: The name and address of the business The name and address of the business The names and addresses of the partners The names and addresses of the partners The quantity of capital which each partner is to provide The quantity of capital which each partner is to provide The way in which profits and losses will be shared The way in which profits and losses will be shared

Two types of partnership can be distinguished: ordinary (or general) partnership ordinary (or general) partnership limited partnership limited partnership

An ordinary partnership Is one in which all partners have unlimited liability and a creditor may seize their personal property to obtain payment of debts the partnership owes him Is one in which all partners have unlimited liability and a creditor may seize their personal property to obtain payment of debts the partnership owes him

In a limited partnership On the contrary, along with one or more general partners there are one or more limited partners. On the contrary, along with one or more general partners there are one or more limited partners.

General partner General partner has unlimited liability (as explained above) Limited partner Limited partner is only liable for the partnership’s debts up to the value of the money they have put into the business

Limited companies

Is a business enterprise that has a separate legal existence apart from its shareholders.

Shareholders the investors who have bought shares in the company and are its owners

Other important features of a company Shareholders control the business on a majority vote basis; Shareholders control the business on a majority vote basis; They elect the directors, who are responsible for the day-to-day running of the company; They elect the directors, who are responsible for the day-to-day running of the company; Profits are distributed as dividends on the basis of the shares held; Profits are distributed as dividends on the basis of the shares held; Shareholders have limited liability Shareholders have limited liability

Cooperative societies

Are non-profit making associations of persons, who are at the same time both members and customers of the cooperative

And whose aim is to economize by producing, buying or selling goods in common, returning the profits to members.

Cooperatives are not confined to retail trade, they also cooperate in: Wholesale trade Wholesale trade Manufacturing Manufacturing Farming Farming Provision of direct services Provision of direct services