Business Structure Flashcards
What is the public sector
Organisations owned and run by government
2 Huge part of the economy some of largest employers in uk
Government spends over £450 billion a year running public sector
3 focus on needs than wants
4 aim to create fair just society
Why do we need public sector
1 some goods and services we need everyday are not available in the private sector eg street lights armed forces- called public goods
2 those that are provided are done so for profit eg health and education and not most can not afford
2 features of public goods
1 non excludeable- no one can be prevented enjoying them
2 non rivalry-one person gaining from these goods does not stop others gaining too
What are positive externalities
consuming merit goods has a positive effect on society eg attending school means an educated skilled workforce
Why does government provide merit goods free at the point of delivery and what does this mean
Because of positive externalities they are paid for through taxation
What is the private sector
part of uk economy operated by business owned by shareholders or private individuals
what is the objective for private sector
1 To make return on investment- it measures how successful a business is
2 To increase shareholders value- measured by dividends paid and share prices
3 survival - more important at the start as new businesses often fail in first 2 years
4 Gaining market share -may spend to gain customers reducing profit short term concentrating on establishing the brand to be the most recognized on the market
5 improving ethics - minimize impact of business on environment
Public private sector
Http://bit.ly/20bCfDm
what is a sole trader
1 most popular form of business in Uk
2 run by single individual
Advantages of sole trader
1 easy to set up - just inform inland revenue
2 low start up costs - no legal costs
3 no formal audited accounts needed
Disadvantages
1 limited capital as rely on savings or secured loan
2 limited range of skills a good plumber but no marketer
3 all decisions and future success rests with one individual
4 has limited liability - liable for all business debts
5 hard to reestablish with death of owner
Why is the main problem running a small business running in to debt and failing in first 2 years
sole traders open, they must let premises over a period of time eg 2 years, they must arrange contracts for phones and equipment. Monthly outgoing rise and they run out of money. They can not walk away as they are tied in for lease period so liable for the costs and assesses are siezed
what is a partnership
joint ownership of a business 2-20 common in accountants layers ad doctors
What are the rules of partnership
Laid down in partnership agreements or deeds of partnership which states the amount each person has invested, what each persons share of profit is, each persons roles and responsibilities, voting share, what happens when a partner dies and rules of dissolution
How are disputes in a partnership resolved
According to 1890 partnership act which states each partner is equally responsible for debts
what are the advantages of a partnership
1 wider shill set
2 capital more available
3shared decision making
4 less pressure
What are the 2 types of LTDs
Public and private LTD
What are LTD companies
1 assesses are owned by the business -
2 this separation is called incorporation
3 the business exists in law so action taken isn against the business and not share holders
4 share holders only loose what they invested - liability is LTD
What is the difference between LTD and PLC
Public LTD trade shares on stock market
What are the 2 main stock markets in UK
Alternative Ivestmnet Market AIM - smaller businesses
London Stock Exchange - larger businesses
Why is ownership of PLCs changing all the time
Because shares are constantly bought and sold
What are the advantages of a PLC
1 limited liability
2shares can only be sold if owners agree so control is not lost outside
3 can raise capital by increasing share holders
4 other businesses and lenders are more likely to fade and invest
5 business continues if owner dies
6 tax advantages for owners
Disadvantages of PLC
1 legal costs to set up are high
2profits are shared
3 shares can not be sold to public and can restrict investment
Financial information is public
What are non profit organisations
They are not in business to make money or maximise profit. There focus is social or ethical
Why do non profit organisations need to produce high quality good and give value for money
Because they are competing with for profit organisations
Why are charities established
Not established to make profit, they earn surpluses to collect money and spend on causes
Some have outlets to sell donations
What are co operatives
Initially set up in 19th century by working people to stop profiteering and exploitation by companies shops and tallymen
2 they are owned by its members -if you are an employee you are a member after a short probation
3 members get dividends (share of profits) in form of money off vouchers
What is the structure on a co op
Much flatter fewer layers and pay differentials between senior and junior workers
When decisions are made each member has an equal vote
What are social enterprises give an example
businesses with clear social objectives
1 trade to help solve problems
2 make profit selling goods in open market then reinvest in their social objective
Jamie Olivers 15 chain of restaurants - training the homeless profits going to open next restaurant
