Types Of Business Flashcards
Name the three sectors of economy
Private sector
Public sector
Third sector
Describe the private sector.
Private sector organisations are owned by individuals, these businesses are driven by profit
Profit from private sector organisations benefit who?
The owners, stakeholders and investors.
How are private sector organisations financed?
They are financed by private money from shareholders and by bank loans.
Describe the public sector.
Public sector organisations are owned by the government. They provide goods and services for the benefit of the community.
How are public sector organisations run?
They are run by the government and financed with money raised from taxes.
Describe the third sector.
Third sector organisations are owned and run voluntarily by trustees. These are not run by the need to make a profit but to help the community.
How are third sector organisations run?
Third sector organisations operate with money from donations and gifts. Any profits are reinvested in the organisation.
Third sector organisations can also be run as a social enterprise.
What are the most common types of ownership in the private sector?
Sole trader
Partnership
Private limited company
Describe a sole trader
A sole trader is a business owner by one person. These are usually small in size and rely on their own saving or loans from bank or family and friend to finance the business
Name some examples of sole trader
Hairdressers, butchers and electricians often operate as sole traders.
Name the advantages of a sole trader
Sole traders keep all the profit they have for themselves and make all the decisions by themselves
Starting up as a sole trader is legally the easiest as it has less rules and regulations than other types of organisations.
Name the disadvantages of sole trader
Sole workers have a heavy workload and shoulder the full burden of responsibility for their business.
Sole traders have unlimited liability
Sole traders have limited finance access as this type of business can be seen as risky to investors
Describe a partnership
Partnerships can have a minimum of 2 and a maximum of 20 partners.
A partnership is set up by th deed of partnership document.
What is the deed of partnership document?
It is a document which sets out the terms of the partnership. Eg how much money each partner invested and what role they each have.
Name examples of partnership
Lawyers, estate agents, doctor and dental practices all often operate as partnerships.
What is a sleeping partner?
A partner who invests but is not involved in the day to day running of the partnership.
Name advantages of a partnership
Different partners in the partnership will bring different skills to the business
Partners can share the workload and responsibilities of the business between them.
It is easier to raise finance for a partnership as banks are more likely to finance it.
Name disadvantages of a partnership
Partnerships have unlimited liability and all partners are liable for the debts of the business.
The profit of the business is split between the partners
Partners may disagree about the future of the business.
Describe a private limited company
A private limited company is a type of business which is separate from the people who own it. Its finances are separate from personal finances and the ownership is divided up into equal shares.
A limited company is private when its shares are not available to the public by being bought and sold on the stock exchange.
What is a shareholder?
A shareholder is someone who owns one or more shares, shareholders don’t own the company they are investors in this separate.
Name advantages of private limited company
Private limited companies have limited liability.
It is easier for a private limited company to raise money through the share issue of ordinary shares.
Profits are only shared between shareholders, they receive this as a dividend.
Name disadvantages of private limited company.
Must be registered with the registrar of companies.
High set up costs
Harder to motivate and control workers.
Describe a charity
A charity is an organisation set up for a specific cause.
Describe a community group
Community groups provide a service for the people and are non profit, all profit goes to ensuring the organisation stays running
Describe a social enterprise
A social enterprise is an organisation that exists to help the community but runs like a business. Profits are reinvested into the organisation.
What is an entrepreneur?
An entrepreneur is the person who brings together the factors of production.
Name 3 skills of an entrepreneur
Identifying a gap in the market
Risk taking
Communication
Determination
Marketing
Decision making
Leadership
