Public vs Private Sectors

Question 1

What is the public sector? Include examples.

Answer 1

• mainly state or government owned.
• provides essential services, such as education, healthcare, and policing.
• financed from taxation.
• aims to provide services that are beneficial to society.

Question 2

What is the private sector?

Answer 2

• owned and financed by private individuals.
• can consist of just one individual to huge multinational businesses.
• most aim to make a profit, but can also be non-profit organisations.
• can be unincorporated (sole trader, partnership), or incorporated (plc or ltd).

Question 3

What is meant by unincorporated?

Answer 3

• no distinction in law between the individual owner and the business itself.
• the identity of the business and the owner is the same.
• tends to be sole traders or partnerships.

Question 4

What is meant by incorporated?

Answer 4

• a legal identity that is separate from the individual owners.
• organisations can own assets, owe money, and enter into contracts in their own right.
• includes private limited companies and public limited companies.

Question 5

What is unlimited liability?

Answer 5

• the owners of a business are liable for all the debts that the business incurs.
• if the debts are greater than the personal assets of the owners, they may be forced into bankruptcy. bankruptcy is where liabilities cannot be paid in full.

Question 6

What is limited liability?

Answer 6

• the liability of the owners of a business is limited to the fully paid-up value of the share capital.
• includes private limited companies and public limited companies.