Business structures Flashcards
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what is a public sector?
-the public sector is that sector of the economy that is owned and controlled by the government rather than individuals
-main aim is to provide a good quality service that is accessible to everyone
E.G. police, school, hospitals
what is a private sector?
-the private sector is owned and controlled by individuals or groups of individuals rather then the government.
-main aim is to survive and make profit
E.G. ASDA, apple
why do some industries exist in both private and public sectors?
people are willing to pay to get better services and some willing to wait
what are public goods?
goods where consumption by one person does not reduce the amount available to others and, once provided, all individuals will benefit
what are the 2 features of public goods?
-non-excludability
-non-rivalry
what is non-excludability?
individuals cannot be prevented from enjoying the benefits provided by public goods
what is non-rivalry?
one person gaining from consumption of a good or services will not prevent others from gaining the goods or services.
what is a merit good?
a merit good is one that is deemed to be beneficial for society but is under provided by the merit
E.G. education, health care
what are the aims of the public sector?
- make essential services available to all for the goods of society
-services that would not be provided by the private sector
-services that can not be easily charged for or sold profitably but benefit everyone
what are the aims of the private sector?
-survival:
=to continue to exist as a business
=this may be the primary objective of a start-up business
-profit:
=to achieve sales revenue that is higher that the total costs
=profit=sr-tc
-growth:
=to increase in size either by value of sales or volume of sales
=this may be organically i.e opening new stores
what benefits does the private sector bring to the economy and society?
-better and faster quality services
-creates jobs
-paying taxes
-tailored
-increase GBP
what is the importance of the private sector?
-profit incentive help drive down prices
-creates jobs
-social enterprise and charities
what is a sole trader?
an individual who owns and runs their business. they may employ workers
what is unlimited liability?
the business is liable for all the debts of the business, up to and including the values of all assets held
what does a sole trader having unlimited liability mean?
-they do not have a separate legal existence from their owner
-meanings owners are personally responsible for all the debts and may sell personal professions to pay back
what are the benefits of a sole trader?
-less paper work
-more earning potential
-low over heads
what are the disadvantages of a sole trader?
unlimited liability
-less customer trust
-higher taxes
what is a partnership?
a partnership involves the joint ownership of a business where 2 to 20 people share the costs, risks and responsibilities of being in business together
what is the deed of partnership?
it is a legal document that sets out the rules under which the partnership will operate
what does the deed of partnership cover?
-sets out the share of profits
=determines how much money the partners will get
-partnerships role in the business
=ensuring the business has an organisational framework
-what will happen if one of the partners were to pass away
=shows where the business will go after partner leaves or passes
-voting shares of each partner
=the number of voting share is often allocated in relation to the relative size of the investment made by each partner
what are the benefits of a partnership?
-liability split between partners
-cover for someone if ill
-more investments
what are the drawbacks of a partnership?
-sharing profits
-unlimited liability
-disagreements
-responsible for other owners mistakes
what is limited liability?
the owners are not responsible for the company’s debt, they can only lose the money that they have invested in the business in form of shares
what is needed to set up a limited company?
-companies must be registered at companies houses
-companies must send the following:
=memorandum of association
=articles of association
what is a memorandum of association?
basic details about company
E.G name, address, nature of company
what is a article of association?
rules of the company
E.G. procedures that must be followed, duties of directors, voting rights
what is a private limited company (ltd)?
type of organisation you can set up to run your business
what are key points about ltd?
-companies have ltd after their name
-owned by shareholders
-can only sell shares onto other shareholders
what are the advantages of an ltd?
-limited liability
-other businesses and lenders are more likely to trade and invest
-more capital can be gained
what are the disadvantages of an ltd?
-legal procedures in setting up
-profits have to be shared with shareholders
-shares cannot be sold to public
what is a public limited company (plc)?
a business that is managed by directors and owned by shareholders.
what are the key points about plc?
-have plc after the name
-shares can be sold to public
-open to more public scrutiny
what are the advantages of a plc?
-limited liability
-more funds can be raised through
-selling shares to the public
what are the disadvantages of a plc?
-loss of control
-lack of privacy
-more complex to set up
what are examples of not for profit organisation?
-charities
-co-operatives
-social enterprises
what is a not for profit organisation?
businesses that are made not to maximise profits instead their focus is on social or ethical objectives
what is social enterprises?
a business with a social or environmental purpose who reinvests at least 50% of the profits they make to help achieve their objectives and create a social/environmental change
what is a co-operative?
-organisations that operate for the wellbeing of their members
-members can be customer, employers, suppliers
what are the benefits of a co-operative business model?
-controlled by and owned by people who works in it
-employers have no responsibility
-equal vote
what are the drawbacks of a co-operative business model?
-managers don’t get paid well
-requires continuous cooperative education programs for members
-could lead to disagreements
what are charities?
organisations with an aim to support a specific cause or benefit for the well being of society
