Types Of Business 🔫 Flashcards
Public sector
Is part of the economic that is funded(financed) by the government through tax payers and is control and operated by the government or its agents eg: public schools, police
Features of a public sector
- aims to proved a service at a lowest possible price
- uses profit to improve the efficiency of the firm or to benefits all citizens
- it’s funded by the government through taxation
Private sector
That part of the economy that is funded by privater individuals and is therefore owned or operated by private business or firm.
Features of private sector
- aims to make a profit
- the business is funded by the owners
- there is little or no government intervention or control
- owner are free to make their own decisions as long as these decisions are not to the laws of the land
Reason for establishing a business
- to be your own boss
- to be financially independent
- to create goods
- to be more creative
- to make a profit
Functions of a business
- to create jobs
-to create a business to contribute to economy growth. Increase the amount of good & services
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Economic growth
It the increase in the total real output of goods and services in an economy overtime
Sole trader/ proprietorships
Is a business in which one person proves the permanent finances and has full control of the business and is able to keep all the profits
Features of sole-trader
- he or she enjoys all profits and bears all risk
- he/she has personal contact with the client(costumers).
- he/she manages the business, but Amy have the service of family members
- capital is limited since the savings of the owner funds the business
Advantages of sole-trader
- Owner keeps all profits
- easy to set up, no legal formalities
- able to choose times and pattern of working
- able to establish close personal relationships with costumers and staff if there is any
Disadvantage of some-trader
- long hours often nessiary to make money
- lack of continuity/ as the business does not have a separate legal status when the owner dies the business dies too.
- unlimited liability/if the business fails even the personal possession of the owner will be sold in order to pay off the debts of the business if needed to
Partner ship
Is a business form by two- twenty people ( partners) to carry on a business together with shared capital investments and usually shared responsibilities.
Features of a partnership
- capital is provided by partners as agreed
- profits are shared equally or as stated in the partnership deed
Formation of a partnership
When a number of persons want to form a partnership a written agreement known as that PARTNERSHIP DEED should be drawn out.
Advantage of partnership
- Additional capital is injected by each partner
- work load is shared among partners thus maybe able to take vacation and enjoy more lager time
- there is better decisions making due to shared knowledge and expertise
Disadvantage of partnerships
- all partners stand to lose if one partner makes a bad mistake
- decisions making may take longer and arguments may arise
- there can be difficulties of management when partners disagree
Co-operative
Are businesses that are formed and operated by their members.
There is democratic control that is one person one vote. Membership is open to constituents.
Characteristics of co-operatives
- they are voluntary, no-profit making organizations engaged in retail or other financial activities.
- They are managed and controlled by their members
- the members are also the clients.
Types of co-operatives
- financial
- agriculture
- consumer
- service
Advantage of of-operatives
> members pool their own resources
members are the owners
there is shared decisions making.
all profits are shared among the membership
Disadvantage of co-operatives
> the membership may not have the expertise necessary to build the organization
decision making is slow and therefore clients may lose out opportunities.
Incorporated
The business has a separate legal identity from the owner
Companies
A company is a business entity hat has been incooperated that is the company has separate legal identity that from the owner
This means that the business is able to enter contracts make any legal claims and face and legal claims that are made against it
Name two types of companies
> public limited
>private limited
Private limited
Is an incooprated business organization consisting of 2-50 members who’s aim is to make profit. Membership is restricted to family and friends
Managements of private limited
Owner manage this type of business or may oppoint special personal the membership must approve and disposal of shears and usually sales of share are restricted to the membership.
Characteristics of private limited company
> capital is obtain from private individuals financial institutions government agency or retain profits
> limited liability,shareholders, have limited liabilities
> company must be registered with the register of companies
> membership is between 2- 50 persons
> word limited must be included in the name
Advantages private limited company
> a large capital base than a sole trader or partnership
has continuously and thus can easily obtain loans
company has a separate legal identity from the ownership
Disadvantage private limited company
> capital is limited since the membership is limited to 50
company must file its finance reports with the registers of companies
selling of shares is restricted to the private grouping
Public limited company
Is also known as a joint-stock is an incorporated company that offers shares to the public .
Disadvantage of public C.L
> the accounts have to be made public
the legal requirements maybe costly and time consuming
since it’s a larger size, decision making takes longer
Management public c.l
Board of directors which is elected by the shareholders at the annual general meeting manages the public limited company.
Characteristics of Public C.L
> must be at least 1 shareholder with no limits on the maximum number of shareholders
share are traded openly in the stock market
public limited company must be incorporated
Franchises
Is a business entity where a franchisor (owner of business) grant a franchisee(purchasers of franchise) a license to use the established brand and reproduce the frachisors product
