Business Structure

Question 1

Not-for-profit organisations – aims/objectives

Answer 1

􏰀 Growing number of businesses who’s objectives are social or ethical rather than making a profit
􏰀 The organisations vary but they share the same characteristics
􏰀 They can provide a range of goods and services. Fashion, groceries, bicycles
􏰀 They are non-governmental organisations
􏰀 They are value driven and have social, environmental, community, welfare or cultural aims and objectives rather than established for financial gain.
􏰀 Profits or surpluses are usually reinvested in to the organisation to further its objectives
􏰀 Many use volunteers in addition to paid employees
􏰀 They include: Charities Co-operatives, worker co-operatives, Social enterprises

Question 2

Charities

Answer 2

􏰀 Charities are established with the aim of collecting money from individuals and spending it on a cause, which can be a narrow focus (single issue) or a broader perspective (multi-issue) in what they are trying to achieve
􏰀 Charities raise the majority of their finances through voluntary donations, but more and more charities now operate retail outlets as well.

Question 3

Charity examples…

Answer 3

Charity examples…
􏰀 Oxfam (started in 1942)
􏰀 Friends of the Earth
􏰀 Save the Children
􏰀 RSPCA (began in 1824)
􏰀 Red Cross (began in 1863)

Question 4

Co-operative

Answer 4

􏰀 A co-operative is an organisation owned by its members.
􏰀 Members might be workers, customers, suppliers, local residents, other enterprises – or a combination of these.

Question 5

Worker co-operative

Answer 5

􏰀 Worker co-operatives are businesses that are owned and controlled by those who work in them.
􏰀 As owners of the business, all employees are likely to be motivated because they are all working towards the same goal.
􏰀 The workers are involved in decision-making, and they decide how any surplus is shared out or reinvested in the business.
􏰀 They often take the form of producer co-operatives, where people work together to produce a good or a service.

Question 6

Social Enterprise

Answer 6

􏰀 Social enterprise businesses will seek to survive, make profit and wish to grow.
􏰀 In this sense they are not essentially different from private enterprise businesses.
􏰀 Social enterprises are distinctive because their social and/or environmental purpose is absolutely central to what they do – their profits are reinvested to sustain and further their mission for positive change.
􏰀 Many social enterprises aim to make profits from selling goods and services in the open market.
􏰀 Instead of paying dividends, they reinvest these
profits towards achieving their social objectives.
􏰀 They trade to help solve social problems, improve the communities they operate in, and improve the environment.

Examples:
􏰀 The Big Issue’s mission statement is:
􏰀 ‘Our mission is to dismantle poverty by creating opportunity, through
self-help, social trading and business solutions.’

Question 7

Example of social enterprise

Answer 7

􏰀 With every pair you purchase, TOMS will give a pair of new shoes to a child in need. One for One. www.TOMS.com Now extended into glasses too

Question 8

Public Sector

Answer 8

􏰀 The public sector is made up of organisations that are owned and run by the government.

Question 9

Objectives of Private Businesses

Answer 9

■ To make a profit
■ To increase share holder value
(depending on the ownership)
■ Survival
■ Gaining market share
■ Improving ethics

Question 10

Legal forms of business

Answer 10

• sole trader
• partnership
• private limited company
• public limited company

Question 11

SOLE TRADER

Answer 11

A business owned and operated by one person, although they can employ staff

Question 12

SOLE TRADER The ADVANTAGES are:

Answer 12

■ There are few legal regulations when setting up the business
■ The owner (Toni) has complete control over the business
■ The owner has close contact with customers
■ Incentives to work hard i.e. he keeps all the
profits
■ The owner can choose his holidays, pay, breaks etc.

Question 13

SOLE TRADER The DISADVANTAGES are:

Answer 13

■ No one to discuss business matters with
■ The business has UNLIMITED LIABILITY
■ Hard to raise finance as there are no other owners to put CAPITAL into the business
■ The business is likely to remain small
■ There will be a lack of specialist skills due to
the businesses size
■ Lack of continuity in event of death, sickness and holidays

Question 14

PARTNERSHIP

Answer 14

A business owned by two or more people who share the decision making, risks and profits

Question 15

PARTNERSHIP The ADVANTAGES are:

Answer 15

■ Share expenses, responsibility and decision making
■ The owners have complete control over the business
■ More CAPITAL is available to invest
■ Individual partners can offer specialisms
■ Continuity – partners can cover each other’s absence

Question 16

PARTNERSHIP The DISADVANTAGES are:

Answer 16

■ Disagreement between partners
■ The business is an UNINCORPORATED BUSINESS . If one partner died, the business would cease to exist
■ The business has UNLIMITED LIABILITY
■ The number of partners is limited to 20
■ One partner could be unreliable or dishonest

Question 17

Deed of Partnership…..

Answer 17

■ …is an agreement between partners which sets out the rules under which the partnership will operate
■ …it sets out the share of profits each partner will receive….this is important in case there is a dispute
■ ….it sets out roles and responsibilities of each partner…an organisational frame work within which to operate
■ ..it notes what will happen to the business if one partner passes away/leaves and how the partnership will be dissolved
■ …voting shares of each partner are set out in the deed…important when key strategic decisions are being made

Question 18

PRIVATE LIMITED COMPANY

Answer 18

a business which is a separate legal entity from the entrepreneur. The entrepreneur can choose who to sell shares to in return for funds invested into the company. Shares can’t be sold on the Stock exchange.

Question 19

PRIVATE LIMITED COMPANY The ADVANTAGES are:

Answer 19

■ The business has LIMITED LIABILITY
■ Easier to raise CAPITAL than partnerships or sole traders as shares can be sold to a large number of people (only friends or relatives)
■ Toni and Marie can retain control of the company if they don’t sell too many shares
■ Management is shared
■ More specialisation can occur
■ Continuity – the business will still exist if one of the SHAREHOLDERS dies

Question 20

PRIVATE LIMITED COMPANY The DISADVANTAGES are:

Answer 20

■ Expensive to set up
■ Shares can’t be sold to the public
■ Accounts have to be lodged with Registrar of companies
■ Less privacy as members of the public can see the accounts
■ Shares can’t be sold without the agreement of the other shareholders

Question 21

PUBLIC LIMITED COMPANY

Answer 21

A business that is able to offer its shares to the public, normally through the stock market in order to raise capital, usually to support the growth of the business. There must be at least two shareholders and there is a legal requirement to publish accounts.

Question 22

PUBLIC LIMITED COMPANY The ADVANTAGES are:

Answer 22

■ The business has LIMITED LIABILITY
■ It is easier to raise finance as shares can be sold on the Stock Exchange and there are no restrictions on selling the shares
■ Continuity – the business will still exist if one of the SHAREHOLDERS dies
■ High degrees of specialisation
■ It is an INCORPORATED BUSINESS

Question 23

PUBLIC LIMITED COMPANY The DISADVANTAGES are:

Answer 23

■ The company is vulnerable to takeovers and
■ SHAREHOLDERS receive some of the profit
■ Annual accounts have to be published in full
■ May have communication and management problems due to size
■ There are a lot of complicated legal issues to overcome when forming and running a PLC

Question 24

Unlimited liability

Answer 24

“ the owner(s) of the business is/are responsible for all of the debts and losses of the business”

Question 25

Limited liability

Answer 25

“ the owners (Shareholders) of the company cannot be held responsible for the debts and losses of the company they own ”

Question 26

Partnership agreement

Answer 26

“ This is the written and legal agreement between business partners. It is not essential for partners to have such an agreement but it is always recommended”

Question 27

Unincorporated business

Answer 27

“ a business which doesn’t have a separate legal identity”

Question 28

Incorporated business

Answer 28

“ a business which has a separate legal identity”

Question 29

Shareholders

Answer 29

“ These are the owners of a limited company. They buy shares which represent part ownership of a company.”

Question 30

Capital

Answer 30

“ the money invested into the business by the owners”
OR
“goods such as premises, machinery and equipment that a business owns”