Private sector

What is it?

A business owned by a single person

It is the simplest form of business

No legal requirements for setup

Owner has umlimited liabibility

Advatages and disadvantages

Advantages

Owner keeps all the profit

Independent

Simple setup

Flexibility

Can offer personal
service because they
are small

May qualify for government
help

Disadvantages

Owner has unlimited liability

May struggle to raise finance

Independence maybe too much
of a responsibilities

Long hours and hard work

No continuity

What is it?

A business that aims to improve
human or environmental well-being.

Have a clear social and/or
envoronmental mission

Generate most of their income
through trade or donations

Reinvest most of their profits

Varieties of forms

Cooperatives

Usually operate as consumer
cooperatives or reatail cooperatives

They are owned and controlled by
their members

They buy shares which entitle them to
elect directors to make key decisions

Any profit made by the cooperatives is
given to members

Worker cooperatives

They are businesses in which its employees
share ownership

Workers will contribute to production and be
involved in decision making, share in the profit
and provide some capital when buying a share
in the business

Charities

They exist to raise money for good causes
draw attention to the needs of
disadvantaged groups

They rely on donations for their revenue

They may also organise fundraising events
such as cake sales, sponsored actvities and
selling greeting cards.

Some run business ventures such as charity
shops

Main features

Owners have limited liability

The business raises capital by selling shares

The shareholders elect directors to run the
company

Whereas soletraders and partnerships pay
income taxes, companies pay corporation
tax on profits

To form a limited company, it is necessary
to follow a legal procedure

Private limited

What is it

Business that tend to be small or
medium sized

However, a small minority are large

Advantages and disadvantages

Advantages

Shareholders have limited liability

More capital can be raised

Control cannot be lost to outsiders

Business continues if a shareholder
dies

Has more status

Disadvantages

Financial information has to be published

Costs money and time to setup

Profits are shared between more members

Takes time to transfer shares to new owner

Cannot raise huge amounts of money

Public limited

What is it

Larger that private limited companies

Their shares can be bought and sold by the
public on the stock exchange

Any person or organisation can buy shares
in a PLC

Advantages and disadvantes

Advantages

Large amounts of capital can be raised

Shareholders have limited liability

PLCs can exploit economies of scale

May be able to dominate the market

Shares can be bought and sold very easily

May have high profile in the media

Disadvantages

Setting up can be very expensive

Outsiders can take control by buying shares

More financial info has to be published

May be more remote from customers

More regulatory control owing to
company acts

Managers may take control rather
than owners

What is it?

A business owned by 2-20 people

Owners will share responsibilities
for running the business

They also share the profits

There are no leagal fomalities to
complete when forming a partnership

However, they can draw up a deed of
partnership

It is a legal document that states the
partner's rights

Advantages and disadvantages

Advantages

Easy setup

Partners can specialise in their
area of expertise

Job of running the business
is shared

More capital can be raised

Finanacial info is not published

Disadvantages

Have unlimited liability

Profit has to be shared

Partners may disagree
and fall out

Any partner's decision is legally
binding on all

Partnersips still tend to be small

What is it?

A business allows another operator
to trade under their name

Franchisor

Who is a franchisor?

Owner of business

Advantages and disadvantages

Advantages

Fast method of growth

Cheaper method of growth

Franchisees take some of the risk

Franchisees are more motivated
that employees

Disadvantages

Profit is shared with the franchisee

Poor franchisees may damage
brand's reputation

Franshisees may get merchandise
from elsewhere

Cost of support for franchisees may
be high

Franchisee

Who is a franchisee?

Operator who trades under
their name

Advantages and disadvantages

Advantages

Less risk

Backup surport is given

Setup costs are predictable

National marketing may be
organised

Disadvantages

Profit is shared with the franchisor

Strict contracts have to be signed

Lack of independence

Expensive way to start a business

What is it?

A large business with significant
production or service operations in
atleast 2 different countries

Key features

Huge assets

Highly qualified and experienced
professional executives and managers

Powerful advertising and marketing capability

Highly advanced and up to date technology

Highly influential both economically and
politically