Topic 2 Types of organisation
Public & Private sectors
Free or Command Everything is privately owned The government has no control Prices for goods are influenced by demand Consumers can buy what they want Workers work hard because they can keep all of their money Businesses can compete with each other The government controls all the resources Government decides what to produce and in what quantities There is very little waste resulting from competing firms There is work for everybody The needs of the population are met, but there are little luxuries
Mixed Free Command
Mixed Economies Free Command
Mixed Economies Free Command
Public or Private Public Private
Public or Private Public Private
Advantages & Disadvantages of Privatisation Business ran efficiently Competition is allowed, better for customers More money can be invested for improvements Business is ran to make a profit, not for government popularity Business is ran for profit, loss making departments will be closed Public companies benefited the majority of population
Starting a business creativity Academia Communication Independent Multi- tasking Prepared to take risks Team work Energetic Problem solving Leadership
(un) Limited Liability (un)incorporate d unincorporated 1 Legal entity incorporated 2 Legal entities Unlimited Liability The owners are responsible for all debts Limited Liability The owners are not responsible for all debts
Business ownership Soletrader Partnership ltd Plc Co-op
1.4 Legal structure Sole traders A sole trader is an individual who owns and runs their own business. The simplest form of business. A sole trader has unlimited liability - they are personally responsible for all debts run up by the business. They could lose their home and all of their assets to pay off any debts that they are unable to pay. Soletrader
1.4 Legal structure Sole traders Benefits and disadvantages of being a sole trader Benefits – Cheap and easy to set up – All profits go to you! – Competitors can’t see your accounts – Highly motivated – You are the boss! Drawbacks – Unlimited liability – Limited finance – Difficult to find cover when ill Soletrader
Choosing the appropriate legal structure 1.4 Legal structure Sarah has always dreamt of being her own boss and at the age of just 22 an opportunity arose. Patricia, the owner of the gift shop where Sarah worked, was due to retire and close the business that she had operated as a sole trader for over 40 years. Sarah wondered whether she had the necessary skills to run the shop herself and finally plucked up the courage to talk to her boss about her buying the shop. Question Time 1.What is meant by the term ‘sole trader’.(2 marks) 2.Explain one advantage of Patricia running the shop as a sole trade (2 marks) 3.Explain one disadvantage of Patricia running the shop as a sole trader.(2 marks) 4.Identify and explain three skills Sarah would need to operate the shop as a sole trader?(6 marks) Soletrader
1.4 Legal structure Partnerships A partnership is where 2-20 people run the business Each partner is equally responsible for debts incurred. Each partner will take a share of the profits Each partner usually shares in the decision making. ‘Sleeping’ partners invest in, but do not run, the business. Partnership
1.4 Legal structure Partnerships Benefits and disadvantages of being a partnership Benefits – Risks and responsibilities are shared – More specialist skills – Competitors can’t see your accounts – Easier to raise finance than a sole trader Drawbacks – Unlimited liability – Arguments can occur between partners – If a partner dies, resigns or goes bankrupt the partnership is dissolved – Trust becomes a significant element between partners Partnership
Limited companies Ltd Plc Only friends & family can buy shares Any member of the public can buy shares
1.4 Legal structure Private Limited Companies Private Limited Companies have Ltd. after the company name. They can have one or more members e.g. shareholders The shareholders are often family members and have a say in the running of the company ltd