Types of business and organisations

Question 1

What are the three sectors of economy?

Answer 1

Private
Public
Third

Question 2

What is the private sectors main objectives?

Answer 2

Growth, survival and making a profit

Question 3

What are the different types of private business?

Answer 3

Sole traders
Partnerships
Private limited companies

Question 4

Explain sole traders? (describe the features, pros and cons)

Answer 4

A sole trader is a business that is owned by one person

Pros
All profits are kept by by the owner
The owner makes all the decisions
The owner chooses the work hours
The business is relatively easy to set up

Cons
It is difficult to get loans and grants 
The owner could be overloaded with work
There is unlimited liability
It is difficult to become an economy of scale

Question 5

Explain partnerships? (describe the features, pros and cons)

Answer 5

A partnership is a small to medium sized business that is owned by 2-20 people

Pros
The profits are shared amongst the partners
The workload is lessened on individuals
Each partner can bring different skills to the business
It is easier to get grants than a sole trader

Cons
There is unlimited liability
Arguments and discord could arise between the partners
A legal document needs to be signed to decide how the profits will be split

Question 6

Explain Private limited companies? (describe the features, pros and cons)

Answer 6

A private limited company (Ltd) is a company that is owned by private shareholders. Normally shareholders will get a return on investment called a dividend. Although the shareholders own it, the responsibility is delegated to a board of directors who have the task of managing the company

Pros
Limited liability for shareholders
Finance can be easily raised by selling shares
Investors will be more willing to invest and give loans/grants to the company
Shareholders and directors bring different skills to the business

Cons
It is more complicated to set up than all of the other types of business
The rules laid down by the companies act have to be followed
Financial accounts have to be saved
Cost of setting up can be high

Question 7

Outline the public sector

Answer 7

The public sector is set up and run by the government
There are three levels of government in Scotland
UK parliament
Scottish government
Local government organisations

Question 8

Where does the public sector get its capital from?

Answer 8

Tax

Grants/donations

Question 9

Outline the third sector

Answer 9

The third sector is made up of two types of organisations, non-profit organisations (charities) and social enterprises. These both work on the principle of improving, publicing and supporting certain causes. They donate money to help these causes.

Question 10

What is a non-profit organisation?

Answer 10

A non-profit organisation such as charities and voluntary organisations are set up to support specific causes