1. THE PRIVATE SECTOR

2. THE PRIVATE SECTOR
Do you remember the definition of the private sector?
The private sector is characterized by private
o__________ in the hands of private i__________. It includes businesses that are run for the b__________ of the people who own them.

3. INDIVIDUALS AND PROFIT
THE BASIS OF THE PRIVATE SECTOR → PROFIT FOR INDIVIDUALS →
reward for the entrepreneurs taking business risks
WHY PROFIT? → earn a good living
→ expand one’s business
→ encourage others to enter the market
WHY DO SMALL FIRMS EXIST?
many entrepreneurs who want to work for themselves →
ready to risk their money and time in a business venture
markets that are too small to accommodate large firms because demand is too small
small firms are often more flexible than large ones → ready to quickly supply cheap specialized products in small quantities to larger businesses

5. TYPES OF BUSINESSES – KEY WORDS
Are you familiar with the following words?
ASSETS LIABILITY SHARES
SHARE CAPITAL LIMITED LIABILITY
UNLIMITED LIABILITY SHAREHOLDERS
LIMITED COMPANY OR CORPORATION

6. TYPES OF BUSINESSES – KEY WORDS
__________ items of value belonging to a person or a company, such as shares, a piece of land, a building or a machine that can be sold to pay a debt; anything owned by a business that can be used to produce goods or pay liabilities
__________ the responsibility to settle a debt
__________ responsibility for debts up to the value of the company’s share capital, that is up to the amount that was invested in the business
__________ the legal obligation to pay all one’s debts, if necessary by the sale of one’s personal assets
__________ a legal entity separate from its owners, which is only liable for the amount of capital that shareholders have invested, and not for debts greater than this amount
__________ the capital that a company has from investors who have bought shares

7. TYPES OF BUSINESSES – KEY WORDS
ASSETS items of value belonging to a person or a company, such as shares, a piece of land, a building or a machine that can be sold to pay a debt; anything owned by a business that can be used to produce goods or pay liabilities
LIABILITY the responsibility to settle a debt
LIMITED LIABILITY responsibility for debts up to the value of the company’s share capital, that is up to the amount that was invested in the business
UNLIMITED LIABILITY the legal obligation to pay all one’s debts, if necessary by the sale of one’s personal assets
LIMITED COMPANY OR CORPORATION a legal entity separate from its owners, which is only liable for the amount of capital that shareholders have invested, and not for debts greater than this amount
SHARE CAPITAL the capital that a company has from investors who have bought shares

8. TYPES OF BUSINESSES – FOOD FOR THOUGHT...
What should one think of before starting a business? Fill in the missing verbs.
1. Who o__________ the business?
2. How was the start-up capital r__________?
3. Who m__________ the business? Who m__________ major decisions?
4. Does the business need to p__________ (disclose, unveil) its accounts?
5. Who c__________ the profits?
6. Are the owners personally liable for losses if a business g__________ bankrupt?
7. Is there a l__________ difference between the owner(s) and the business?

9. TYPES OF BUSINESSES – FOOD FOR THOUGHT...
What should one think of before starting a business? Fill in the missing verbs.
1. Who owns the business?
2. How was the start-up capital raised?
3. Who manages the business? Who makes major decisions?
4. Does the business need to publish (disclose, unveil) its
accounts?
5. Who collects the profits?
6. Are the owners personally liable for losses if a business goes
bankrupt?
7. Is there a legal difference between the owner(s) and the
business?

10. TYPES OF BUSINESSES IN THE PRIVATE SECTOR – RB p 48
Study the table in the RB, p 48 and answer the questions from the previous slide with regard to different types of businesses in the private sector.

11. UNLIMITED LIABILITY – SOLE PROPRIETORSHIP
one person (sole p_________ /sole t_________) provides the capital (past s_________, bank l__________ and overdrafts)
usually works in the firm and has complete c_________ of
the business
receives and keeps all the p_________
bears the l_________
has u_________ l__________ (in case of bankruptcy may have to sell nearly all the assets of the business including their personal possessions to pay the debts)
easy to s_________ up, but difficult to keep up with larger firms and raise money for expansion
one-man businesses (o_________ by one person only), can employ other workers
no special l_________ documents needed and it is not necessary to publish the accounts
common in service industries, such as tourist industry, retailing (shop owners), plumbers, mechanics, hairdressers, etc.

12. UNLIMITED LIABILITY – SOLE PROPRIETORSHIP
one person (sole proprietor /sole trader) provides the capital (past savings, bank loans and overdrafts)
usually works in the firm and has complete control of
the business
receives and keeps all the profits
bears the losses
has unlimited liability (in case of bankruptcy may have to sell nearly all the assets of the business including their personal possessions to pay the debts)
easy to set up, but difficult to keep up with larger firms and raise money for expansion
one-man businesses (owned by one person only), can employ other workers
no special legal documents needed and it is not necessary to publish the accounts
common in service industries, such as tourist industry, retailing (shop owners), plumbers, mechanics, hairdressers, etc.

13. SOLE PROPRIETORSHIP – ADVANTAGES OR DISADVANTAGES?
unlimited liability for d________
limited f________
direct c________ of business
few legal r________ to set up
c_______ on profits provides incentive
no opportunity to s________
s_______ limited to those of owner
quick d________
business ends on d________

14. SOLE PROPRIETORSHIP – ADVANTAGES OR DISADVANTAGES?
unlimited liability for debts
limited finance
direct control of business
few legal requirements to set up
claim on profits provides incentive
no opportunity to specialise
skills limited to those of owner
quick decisions
business ends on death

15. PARTNERSHIP at least two partners who c__________ capital to
the business and s__________ the profit
u__________ liability for debts
no special l__________ requirements, but future partners are advised to draw up a deed of partnership → a legal document which covers the following matters: who provides the c__________, controls
the business and how to distribute the p__________
common in professions undertaken by doctors, lawyers, architects, accountants, etc.

16. PARTNERSHIP at least two partners who contribute capital to
the business and share the profit
unlimited liability for debts
no special legal requirements, but future partners are advised to draw up a deed of partnership →
a legal document which covers the following matters: who provides the capital, controls the business and how to distribute the profits
common in professions undertaken by doctors, lawyers, architects, accountants, etc.

17. PARTNERSHIP – ADVANTAGES OR DISADVANTAGES?
unlimited l_________ for debts
relatively l_________ finance
easy c_________
each partner can s_________
more f_________ than the sole owner
partnership ends on death of any p_________
service of s_________ available in return for share
of profits

18. PARTNERSHIP – ADVANTAGES OR DISADVANTAGES?
unlimited liability for debts
relatively limited finance
easy communication
each partner can specialize
more finance than the sole owner
partnership ends on death of any partner
service of specialists available in return for share of profits

19. SOLE PROPRIETORSHIP OR PARTNERSHIP?

20. UNLIMITED LIABILITY - LET’S RECAP!
TYPE OF BUSINESS
SOLE PROPRIETORSHIP
PARTNERSHIP
SOURCES OF CAPITAL
OWNERSHIP
CLAIM ON PROFITS
CONTROL AND DECISIONS
LIABILITY
LEGAL DOCUMENTS
TYPICAL
PROFESSIONS
ADVANTAGES
DISADVANTAGES

21. SPEAKING - Describe each type of business organization from the table above by using the sentences below.
e.g. Sole proprietorship is a type of business which is owned by
one person.
...is a type of business which is owned by...
It is controlled by... and managed by...
This business is financed by...
Business decisions are made by...
...has/have a claim on profits.
...is (are) /is not (are not) personally liable for...because this business has limited/unlimited liability.
The advantage(s) of…over… is/are that…
The disadvantage(s) of… over… is/are that…

22. FRANCHISING co-operation between a big firm and a sole proprietorship
a business in which a big company (FRANCHISOR) sells an individual (FRANCHISEE) the rights to run a business using its established format
the franchisee must put up the necessary capital to open the business, and is under contract to pay an initial sum of money (FRANCHISE FEE) to the franchisor, as well as a percentage of the annual turnover (MANAGEMENT SERVICE FEE)
Starbucks
American
Express
H & M
Benetton
McDonald’s

23. FRANCHISING – ADVANTAGES OR DISADVANTAGES?
the franchisee takes the full advantage of
the franchisor’s reputation, experience and brand
name
royalty payments to the franchisor
a big firm can expand without investing a large amount of capital
less independence
much greater chance for success
easier to raise money
technology transfer

24. LIMITED LIABILITY - JOINT STOCK COMPANIES
PRIVATE LIMITED COMPANY (Ltd)
owners put up the capital themselves or borrow from b__________ (bank loan)
shareholders claim profits by d__________ payments
cannot offer their s__________ for sale to the general public
controlled by a B__________ of D__________ appointed/ elected by the shareholders → shareholders may or may not take part in the running of the business
l__________ liability for debts
legal requirements: two documents (Memorandum of Association (GB) or Certificate of Incorporation (US) and Articles of Association (GB) or Bylaws (US) are sent to the Registrar of Companies

25. LIMITED LIABILITY - JOINT STOCK COMPANIES
PRIVATE LIMITED COMPANY (Ltd)
owners put up the capital themselves or borrow from banks (bank loan)
shareholders claim profits by dividend payments
cannot offer their shares for sale to the general public
controlled by a Board of Directors appointed/elected by the shareholders → shareholders may or may not take part in the running of the business
limited liability for debts
legal requirements: two documents (Memorandum of Association (GB) or Certificate of Incorporation (US) and Articles of Association (GB) or Bylaws (US) are sent to the Registrar of Companies

26. PRIVATE LIMITED COMPANY (Ltd) – ADVANTAGES OR DISADVANTAGES?
limited liability for d________
access to large a________ of capital
suitability for larger scale o________
d________ for owners wanting to sell shares
more legal r________ to set up a business
c________ of life of business
possible c________ between owners and management

27. PRIVATE LIMITED COMPANY (Ltd) – ADVANTAGES OR DISADVANTAGES?
limited liability for debts
access to large amounts of capital
suitability for larger scale organisation
difficulty for people wanting to sell shares
more legal requirements to set up a business
continuity of life of business
possible conflicts between owners and management

28. PUBLIC LIMITED COMPANY (Plc.)
limited l_________ for debts
legal requirements: 1) set out in the Companies Act and publication (d_________) of annual accounts
s_________ are the owners who appoint the Board of Directors to control the m__________
shareholders can, but do not have to take part in r__________ the company whose shares they have bought
sell their shares on the s__________ e__________
issue (s__________) shares to raise finance for growth
the p_________ which is not re-invested in the company is paid out as a dividend
anyone buying _____% of the shares gains control of a Plc.

29. PUBLIC LIMITED COMPANY (Plc.)
limited liability for debts
legal requirements: 1) set out in the Companies Act and
2) publication (disclosure) of annual accounts
shareholders are the owners who appoint the Board of Directors to control the management
shareholders can, but do not have to take part in running
the company whose shares they have bought
sell their shares on the stock exchange
issue (sell) shares to raise finance for growth
the profit which is not re-invested in the company is paid out as a dividend
anyone buying 51% of the shares gains control of a Plc.

30. PUBLIC LIMITED COMPANY (Plc.) - ADVANTAGES OR DISADVANTAGES?
limited l_________ for debts
formalities and r__________ of establishment
a_________ to large amounts of capital
continuity of life of b_________
suitability for l_________ scale organisation
disclosure of a_________
increased s__________ of ownership and management
possibility of t__________

31. PUBLIC LIMITED COMPANY (Plc.) - ADVANTAGES OR DISADVANTAGES?
limited liability for debts
formalities and regulations of establishment
access to large amounts of capital
continuity of life of business
suitability for large scale organisation
disclosure of accounts
increased separation of ownership and management
possibility of takeovers

32. LIMITED LIABILITY – LET’S RECAP!
TYPE OF BUSINESS
PRIVATE LIMITED COMPANY (Ltd)
PUBLIC LIMITED COMPANY (Plc)
SOURCES OF CAPITAL
OWNERSHIP
CLAIM ON PROFITS
CONTROL AND DECISIONS
LIABILITY
LEGAL DOCUMENTS
TYPICAL
PROFESSIONS
ADVANTAGES
DISADVANTAGES

33. SPEAKING - Describe each type of business organization from the table above by using the sentences below.
e.g. Ltd. is a type of business which is owned by shareholders.
...is a type of business which is owned by...
It is controlled by... and managed by...
This business is financed by...
Business decisions are made by...
...has/have a claim on profits.
...is (are) /is not (are not) personally liable for...because this business has limited/unlimited liability.
The advantage(s) of…over… is/are that…
The disadvantage(s) of… over… is/are that…

34. VOCABULARY – TYPES OF BUSINESSES IN THE PRIVATE SECTOR – LEGAL REQUIREMENTS – RB, p 47
Work in groups of 3: each student completes one of the three paragraphs with the missing words. Then compare your answers.
Finally, complete the fourth paragraph with the missing words and answer the following questions:
1 What documents are required when forming a limited
company?
2 What information should be provided in the documents?
3 What can shareholders do if they are not satisfied with
the company’s performance?

35. VOCABULARY – TYPES OF BUSINESSES IN THE PRIVATE SECTOR – LEGAL REQUIREMENTS – RB, p 50
Complete the text in the RB, p 50 and find out more about the LEGAL REQUIREMENTS for setting up different types of businesses in the private sector.

36. PUBLIC VS PRIVATE SECTOR
*PUBLIC – 1) of, or related to all the people
(available to everyone)
2) owned by the state
What does public mean in public limited company?
What does it mean in public corporation?

37. THE PUBLIC AND THE PRIVATE SECTOR
PRODUCTION OF
GOODS AND
SECTOR
BUSINESS ORGANIZATIONS
MIXED ENTERPRISE
SECTOR
NATIONALISED INDUSTRY OR PUBLIC
LOCAL AUTHORITIES
UNINCORPORATED BUSINESSES
INCORPORATED BUSINESSES
COMPANY (Ltd)
COMPANY (Plc)
TRADER
PARTNERSHIP

38. WHAT DO THESE VISUALS TELL US ABOUT THE PRIVATE SECTOR?