1.2 Types of organizations

Question 1

private sector definition

Answer 1

owned and controlled by private individuals and businesses, rather than by the government. The main aim of most private sector organizations is to make profit.

Question 2

public sector defintion

Answer 2

the sector of the economy where resources are owned and controlled by government

Question 3

state-owned enterprises definition

Answer 3

Organizations that are wholly owned by the government

Question 4

What are the three main types of profit organisations

Answer 4

Sole-traders, Partnerships, corporations

Question 5

definition of sole traders

Answer 5

self-employed person who runs and controls the business and is the sole person held responsible for its success (profits) of failure (unlimited liability)

-They may work alone or employ other people, start up capital is obtained from personal savings or borrowings
-An important legal point is that the business is unincorporated (the owner is the same legal entity as the business)
-Unlimited liability (fully legally responsible for any debts, must pay debts with own money)

Question 6

Advantages of sole trader (5)

Answer 6

Few legal formalities (easy to set up)
Owner receives all of profit made by firm
Being your own boss
Personalised service to customer
Privacy - don’t have to make financial records available to public

Question 7

Disadvantages of sole trader (5)

Answer 7

Unlimited liability (no limit to the amount of debts)
Limited source of finance and economies of scale
High risks
Workload and stress
Lack of continuity (if owner isn’t present business can be jeopardised)

Question 8

Definition of partnerships

Answer 8

profit-seeking business owned by two or more persons (partners). They share responsibilities, burdens and financing of owning a business

-Silent partners do not actively take part in the running of the partnership but have a financial stake in it and limited liability.
-Without a contract (deed of partnership), profits or losses must be shared equally amongst the partners and all partners have the same rights in the running of the business.
-They have unlimited liability

Question 9

Advantages of partnerships (4)

Answer 9

Financial strength
Specialisation and division of labour
Financial privacy ( don’t have to publicise financial records)
Cost-effective - raising productivity

Question 10

Disadvantages of partnerships (4)

Answer 10

Unlimited liability
Lack of harmony (disagreements and conflict)
Lack of continuity if partner dies or leaves the firm
Prolonged decision making

Question 11

Corporations (INC) definition

Answer 11

-Companies are businesses owned by their shareholders. These are individuals or other businesses that have invested money to provide capital for a company.
-Companies are incorporated businesses (there is a legal difference between the owners of the company and the business itself).
-Limited liability means that shareholders do not stand to lose personal belongings if the company goes into debts (the max they can lose is their investment)
-A board of directors (BOD) is elected by shareholders to run the company on their behalf.

Question 12

What are the two types of limited liability companies

Answer 12

Private limited company (LTD)
Public limited company (PLC)

Question 13

Private limited company (LTD)

Answer 13

Owned by at least 2 shareholders
Shares are sold privately to friends and family, they receive dividends in return

Question 14

Public limited company (PLC)

Answer 14

This is able to advertise and sell its shares to the general public via a stock exchange

Question 15

Advantages of corporations (5)

Answer 15

Finance through shares
Limited liability
Tax benefits
Productivity in specialist managers and staff
Benefit of economies of scale

Question 16

Disadvantages of corporations (5)

Answer 16

Communication problems
Added complexities & bureaucracy
Compliance costs
Disclosure of information
Loss of control

Question 17

Definition of social enterprise

Answer 17

revenue-generating business with social objectives at the core of their operations. These strive to return a surplus for social gain and they can be operated as a non-profit and for-profit organisation.

Question 18

what are the two main goals for social enterprises

Answer 18

-To achieve social objectives
-To earn revenue in excess of costs

Question 19

definition of cooperatives

Answer 19

enterprises owned and run by their members, such as employees or customers, with the common goal of creating value for their members by operating in a socially responsible way.

Question 20

characteristics of cooperatives

Answer 20

All employees have a vote in decision making.
There are three main types:
-Consumer cooperatives - owned by the customers who buy the goods/services for personal use - child care, health care cooperatives, etc
-Worker cooperatives - set up, owned and organized by their employees - cafes, etc
-Producer cooperatives - these join and support each other to process or market their products

Question 21

Advantages of cooperatives (3)

Answer 21

-Employees have a key stake in cooperative so are more interested in how it performs
-Employees have a say
-Social benefits & public support

Question 22

Disadvantages of cooperatives (3)

Answer 22

-Low salaries & limited source of finance
-Slower decision making
-Limited promotional opportunities

Question 23

Definition of Microfinance providers

Answer 23

This is a type of financial service aimed at entrepreneurs of small businesses especially those on low incomes.

These enable the disadvantaged members of society to gain access to essential financial services to help eradicate poverty

Question 24

Advantages of Microfinance providers (3)

Answer 24

-Microfinance helps those in poverty to become financially independent
-Job creation
-Social wellbeing

Question 25

Disadvantages of Microfinance providers (3)

Answer 25

-Immorality
-Limited finance
-Limited eligibility as they have to ensure business can repay

Question 26

Public-private partnerships or enterprises (PPP)

Answer 26

This occurs when the government works together with the private sector to jointly provide certain goods or services.

Question 27

what are non-profit social enterprises

Answer 27

These are businesses that run in a commercial-like manner but without profit being the main goal. Instead they use their surplus revenues to achieve their social goals rather than distributing the surplus as profits or dividends

Question 28

what are the two main types of non-profit social enterprises

Answer 28

Non-governmental organizations (NGOs)
Charities

Question 29

Non-governmental organizations (NGOs)

Answer 29

This is non-profit social enterprise that operates in the private sector. This organization does not aim primarily to make profit, they run for the benefit of others in society.

There are two types:
Operational NGOs - established from a given objective or purpose
Advocacy NGOs - take a more aggressive approach to promote or defend a cause, striving to raise awareness through direct action

Question 30

Charities

Answer 30

provide voluntary support for good causes (protection of children, etc). Its key function is raising funds from individuals and organizations to support a cause that is beneficial to society.

Question 31

Advantages of Non-profit social enterprises (3)

Answer 31

-Social benefits, public recognition, trust and free of corporate tax
-Donors can get income tax allowances (raises incentives for donors)
-Limited liability

Question 32

Disadvantages of Non-profit social enterprises (3)

Answer 32

-Must be registered before they operate
-Disincentive effects (lack of profit can cause motivational problems) and limited source of finance
-Potential charity fraud and inefficiencies