1.2 Types of business

Question 1

Private sector

Answer 1

Owned and controlled by private individuals with an aim to earn profit for owners(for most private sectors)

Question 2

Public sectors

Answer 2

Public sector firms are owned and controlled by the Government and are usually funded through taxation, usually providing essential goods/services that private sector provide.

Question 3

nationalization

Answer 3

Nationalisation is when the government takes over ownership of firms that previously operated in the private sector.

Question 4

Types of organizations

Answer 4

sole trader

partnership

coperations(provate held or pblich held)

Question 5

Sole trader

Answer 5

A sole trader is unincorporated business in which an individual is the owner of the own business. The owner runs and controls the business and is the sole person held responsible for its success or failure.

Question 6

Advantages of sole trader

Answer 6

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few legal formalities
- Easy to set up and start-up costs are usually cheaper then other types of business entities

Profit taking
- Sole trader is the only owner meaning 100% of profits goes to one person

Being own boss
- Don’t take orders from anyone, have flexibility find decision such as dictating working hours

Personalised service
- Provide personalised service to consumer because they have the opportunity tog et to know most of their costumer making them feel soeciall

Privacty
- Don’t have to make financial records public

Quicker decision making
- No other owners to cosult, can make decision quickly with no one stopping them.

Question 7

Disadvantages of sole trader

Answer 7

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High risk
- They have the highest risk of failure, bigger threats from bigger companies

Unlimited liability
- Since you are an unicorperted business there is no limits to the debt you can have.

Workload and stress
- They have to do their own HR, accounting, marketing, operational management by themself.

limited source of finance
- Its difficult to secure funds beyond personal saving which is limited.

limited economies of scale
- Can’t benefit from economies of scale , prices are less competitive then bigger companies.

lack of continuity
- If owner are not present then there is no lack of contunitty.

Question 8

Partnership

Answer 8

A type of private sector business that is owned by 2 or more people . They share the responsibilities and burdens imvolved in running and owning a business
- a for-profit private secotr business
- mainly financed from personal funds of eachother

Question 9

Deed of partnership

Answer 9

Formal legal agreement between parnters include:

• the amount of finance contributed by each partner
• roles(obligation of each partner)
• how proft/losses should be shared between partners
• conditions for introducing new partners
• clauses for the withdrawal of a partner
• procedure for ending the partnership

Question 10

Silent partners

Answer 10

invest in company without being involved in daily operations.

• are eligible for any portions earned by patnership

Question 11

advanatges of partnership

Answer 11

Financial strength
- Partnership has more financial strength by pooling funds together.

Specialization and division of labor
- They can benefit by shared expertise, shared workload

Financial privacy
- They do not have to public their financial records unlike sole traders

Cost-effectivness
- They are more cost-effective then sole-trader as each partner specialises in certain aspects of business.

Question 12

Disadvanatges of partnership

Answer 12

Unlimted liability
- Partnerships are responsible for their debts.

lack of contunituty
- If a partner leaves the partnership deed becomes invalid which is a lack of continuity

prolonged decision making
- It is likely to make decision making take longer as there are more owners involved.

Lack of harmony
- Disagreements and conflicts within partnerships are common which cause a lack of harmoney

Question 13

Corporations

Answer 13

Refers to a a limted liability business that is owned by shareholders. A certificate of incoprations gives company seperte legal entitity from shareholders.

• can be both private held or public held
• owned by shareholders
• unlimited number of shareholders
• incorporated business
• owners can own but don’t have to work there

BOD + CEO= run company
- majority shareholder (has highest % of shares) has the final say
- Unlimited liability
- must have annual general meeting/AGM to allow owners to have a say in running business

Question 14

3 most important documents for corperations

Answer 14

Memorandum of associated + articles of associatetion = certificate of incorporations

memeorndum= conditions necessary to run the company

articles of association=. basic rules of company

certificate of incorperations= doc that gov gives to company allowing them to trade

Question 15

Private held Company

Answer 15

a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in their respective listed markets .

Corporation
- a small number of shareholders(shares are harder to buy)
- to buy shares you need to contact shareholders
-difficult to cash out (leave company)
- usually owned by families
- no need to publish much financial information

Question 16

Public held company

Answer 16

Its an incorperated limited liability business that allows shareholders to buy and sell shares in the company via stock exchange.

-privately held company turned public
- public = shares available to the public through stock exchange
- greater access to capital
- flotation = company sells all/part of business to shareholders/external investors (process is called initial public offering/IPO)
- IPO makes copnay registered on public stock exchange
- floatation is an additional source of finance.

Question 17

Social Enterprise

Answer 17

A social enterprise is a revenue generating business or organization with socail objectives at core of operations. They can be for-profit or non-profit business entititeis, but all profits or surpluses are reinvested for socail purpose and not distributed to owners.

Question 18

Types of social enterprises

Answer 18

For-profit Social entrpise
- private secotr coperatives
- Public sector coperatives
- cooperatives

Non-profit
- NGOS

Question 19

Private secotr for profit coperations

Answer 19

Social well being is the main goal
- use profit as a tool to achieve socially important aims
- same features as private/ public

Question 20

Public sector for profit coperation

Answer 20

-same as private sector companies but public
- run and funded by government
- provide public services

Question 21

cooperatives

Answer 21

• Run by own memebers
• goal= generate value for members by operating in socially responsible ways

3 main types:

Consumer cooperative
- owned by consumer that buys goods/services from cooperative for personal use
- foods
- financial services

worker cooperative
- owned by employee member
- cafes

Porducer cooperatives
- cooperatives that join/support each other to process market goods

Question 22

Advanatges of cooperatives

Answer 22

Incentive to work
- Employees have stake in cooperative, so they care about how it performs, enhances motivation

Decision making power
Since employees have a say in decision making this improves members commitment and employee loyalty

Social benefits
- Since our run in socially responsible way, create social gains that can be enjoyed by wider community

Public support
- Since they work in socially responsible manners that have better public image and support from community

Question 23

Disadvantages of cooperatives

Answer 23

Disincentive effects
- ineffective managers and emplyees BCS they don’t pay high salrys

Limites sources of finaiance
- They can not raise finds through stock exchange, it is limited to the amount contributed

Slower decision making
- All memmebers are involved so it slows done the process

Limited promotional opportunities
- They have flatter organizational structure, so there are fewer opportunities

Question 24

NGO (non-profit)

Answer 24

They are private sector not-for-profit social enterpise that operates for the beenfit of others rather then primarily trying to earn profit.

Question 25

Pros of NGOS

Answer 25

• custimer loyalty
• social an ecological sustanibility
• positive change

Question 26

cons of NGOS

Answer 26

• complience cost(being ethical is expensive)
• economic sustainability
• transparency, prolonged decions making

Question 27

Types of NGOS

Answer 27

Opertinaol NGO
- established from givin objective/purpose
- involved in relif-based projects

Advocacy NGO
-more aggressive to promote cause
- raising awareness through direct action

Question 28

Evaluate Companys

Answer 28

ADVANTAGES

Raising finance
-Can raise large amounts of capital by selling shares

Limited liability

continuity

Economies of scale

Producitivity-
- can hire specialists and manager to run firm

Tax benefits
- Companies pay cooperation tax on profits, income taxes tend to be more expensive then cooperation tax

DISADVANATGES

Communication problem

Added complexities
- unlimited liability is cheaper then running limited

Complience costs

Disclouser of info
- can be time consuming and expensive

Beuracracy

Loss of control