Chapter2 Business Sectors And Types Of Business Flashcards
What is the chain of production
The stages that a product passes through until it reaches the final consumer
Distinguish between primary secondary and tertiary organizations
Primary- Businesses in this sector are concerned with extractive industries e.g. farming, fishing and mining
Secondary- Businesses in this sector are concerned with manufacturing e.g. turning raw materials in to semi finished and finished products
Tertiary- Businesses in this sector are concerned with the output of services e.g. retailing, banking and transportation. This sector is the largest (80%)
Define deindustrialisaion
The decline in the size of the secondary sector of the economy.
Distinguish between private, public sector and third sector organizations of businesses
Public- Businesses and organizations owned and run by local or central government whose objective is to provide a service rather than make a profit e.g. NHS
Private-Businesses owned and run by private individuals for profit
Third- It’s one that is neither in the public or private sector. It includes charities, community groups, faith group, self-help groups, social enterprises, and cooperatives, and they are motivated by the desire to achieve social goals.
What is a sole trader
It is the simplest form of business organization. They own the business and make all the decisions affecting it. It doesn’t mean that the business only has one person working there they could employ a number of people, but they are in control.
Advantages of being a sole trader
-there are few legal requirements when setting up as a sole trader so it’s possible to start a business quite quickly and with relatively little capital
-the sole trader doesn’t have to consult with anyone, and therefore making decisions is quick and easy
-keeps all the profit
-they can’t issue shares so they can’t be subject to a takeover in the way that a public company can
-apart from having to provide information for income tax purposes, the financial state of the business can be kept private
Disadvantages of a sole trader
-they are fully responsible for all the debts, so if the business runs into financial difficulty, they may be forced to sell their personal possessions
-They have unlimited liability
-They can easily get overworked
-Sole traders are usually small businesses so larger firms may not wish to deal with them as they feel that they don’t have the expertise or ability to deliver in a way a larger business could
-if he or she dies, the business comes to an end there’s no continuity
What’s a partnership?
-When two or more people run a business together
-minimum of two on maximum of 20
-it’s good business practice for partners to draw up a deed of partnership, which is a legal document which governs the running of this type of business it sets out and clarifies matters such as how much money each partner is expected to contribute, how much income each partner control responsibilities and duties of each partner
If no deed exists the business will be governed by the partnership act of 1890 stating the responsibility for running the business and the distribution of profits and losses to be shared equally among the partners
Advantages of partnerships
-It’s easy to establish
-Work is shared different partners with different skills can be employed
-partners specialize in what they do best
-losses are shared
Disadvantages of partnerships
-they have unlimited liability
-decision-making is slower and there is possibility of disagreement
-losses are shared, but so are profits
-in law, a partnership can be automatically ended with the departure resignation or death of one partner so partners should make provision by having a written agreement about what will occur if this happens
Limited liability partnerships
They became legal in 2001 and they combined some features of partnerships with some of those limited companies.
It’s a separate legal entity, so it’s owners have limited liability. These owners are called members.
Before 2001 if a group of people wanted limited liability, they had to form a company.
creation of LLP means that it’s possible to have the advantages of a partnership combined with limited liability, but it comes with a price
Types of companies-private Limited company and public Limited companies
-these are often family run businesses where the advantages of being incorporated can be linked to the ability to keep control within a fairly small group of people. It may operate nationally and often in international markets as well known as multinational which is producing in the foreign market rather than simply exporting to it
Public limited companies are larger
What are the differences between public and private Limited companies?
-a public company is a PLC and a private company‘s name must end with limited or LTD
-Where shares can be traded a PLC can sell shares on the stock market but a private company can’t so a private company shares can be bought by anyone. In a private limited company shares must be sold through private negotiation and can’t be advertised for sale to the public.
-the possibility of being taken over as a PLC shares are available for anyone to buy. It can be legally taken over if an investor gains 51% of its shares.
Advantages of companies
-It’s access to large amounts of capital through the ability to issue shares, meaning there are greater opportunities for growth
-Limited liability encourages people to invest in the company
-it doesn’t come to an end when the original owner dies
Disadvantages of companies
-setting up a company can be expensive
-Company accounts aren’t private and it’s difficult to keep the business financial details hidden from competitors
-the danger takeover
