Types of business organisations Flashcards
Types of private sector businesses
- sole trader
- partnership
- private limited company
- public limited company
- multinational
- franchise
Sole trader
A sole trader is a business owned by one person.
Advantages of being a sole trader
- easy to set up
- sole trader retains all profits for herself
- sole trader makes all the decisions
Disadvantages of being a sole trader
- can be difficult to raise finance
- unlimited liability
- heavy workload
Partnerships
A partnership is a business set up by the deed of partnership document.
Partnerships can have a minimum of 2 and a maximum of 20 partners.
Advantages of being a partnership
- more equity available to finance the business compared to a sole trader
- different partners can bring different skills
- workload is shared
Disadvantages of being a partnership
- unlimited liability
- profit is shared between the partners
- partners may not always agree on decisions for the business
Private limited company
Companies often need to grow larger than the maximum number of 20 partners allowed in a partnership.
Advantages of being a private limited company
- owner can retain control
- more able to raise money
- limited liability
Disadvantages of being a private limited company
- must be registered with the registrar of companies
- high legal and administrative set up costs
- harder to motivate and control workers
Public limited companies
Unlike a private limited company, a public limited company can offer shares of the business to the public.
There are some requirements which a company must meet before they can become a Plc:
- they must have share capital of at least £50,000
- they must have two shareholders, two directors, and a qualified company secretary
Advantages of being a public limited company
- raise more money by selling shares on the stock exchange
- easier to grow and diversify
Disadvantages of being a public limited company
- disagreement over how to run the company
- threat of takeover
- difficult to pursue objectives other than increasing profit
Multinational organisation
A multinational organisation is a company which has its headquarters in one country but has assembly or production facilities in other countries.
Reasons to become a multinational
- to increase market share
- to secure cheaper premises and labour
- to avoid tax or trade barriers
- government grants
Advantages of being a multinational
- creating jobs
- bringing expertise and improving the skills of the workforce
- benefiting from economies of scale
- gaining technical economies with automated equipment
- achieving purchasing economies
Multinationals can be accused of
- relying on deskilled jobs that may be low paid
- not keeping profits in the host country
- cutting corners
- exploiting the workforce and environment
- exerting political muscle
Franchising
An entrepreneur can opt to set up a new independent business and try to win customers. An alternative is to buy into an existing business and acquire the right to use an existing business idea.
What is a franchise?
A franchise is a joint venture between:
A franchisee, who buys the right from a franchisor to copy a business format.
And a franchisor, who sells the right to use a business idea in a particular location.
Where is the money raised for public sector organisations from?
- income tax
- national insurance
- VAT
- air passenger duty
- fuel duty
What are the three different levels of government in Scotland?
- UK government
- Scottish government
- local government
What are the reserved matters that are run by the UK government?
- economic policy
- defence
- international relations
What are the devolved matters that the Scottish government is responsible for?
- health
- education
- police
- transport
What services do the local governments run?
- housing
- libraries
- schools
- bin collection and recycling
