Types Of Business Organisations - UB

Question 1

What are the 3 types of organisations?

Answer 1

In business there are different types of organisation categorised by different types of ownership.

• private sector
• public sector
• third sector

Question 2

Who owns a private sector company, and what are they driven by?

Answer 2

Private sector organisations are owned by individuals. These businesses are driven by profit.

Question 3

Who benefits from the profit a private sector organisation makes?

Answer 3

The profit from private sector organisations benefits the owners, shareholders and investors.

Question 4

Who finances a private sector company?

Answer 4

They are financed by private money from shareholders and by bank loans.

Question 5

Who owns a public sector organisation, and what do they provide?

Answer 5

Public sector organisations are owned by the government. They provide goods and services for the benefit of the community.

Question 6

Who runs a public sector organisation and how do they operate?

Answer 6

They are run by the government. They operate with money raised from taxes.

Question 7

Who owns and runs a third sector organisation?

Answer 7

Third sector organisations are owned and run voluntarily by trustees

Question 8

If a third sector company is not run to make a profit, what is their aim?

Answer 8

These organisations are not run by the need to make profit but by the need to help the community.

Question 9

How does a third sector company operate ?

Answer 9

They operate with money from donations and gifts. Any profits are reinvested in the organisation.

Question 10

What can a third sector organisation be run as?

Answer 10

Third sector organisations can be run as a
social enterprise

Question 11

What are the most common types of businesses ownership in the private sector?

Answer 11

The private sector has different types of business ownership. The most common ones are:

• sole trader
• partnership
• private limited company

Question 12

How many people own a sole trader business?

Answer 12

One person

Question 13

What do sole traders rely on?

Answer 13

Sole traders rely on their own savings,
bank loans or loans from friends and family to finance their business.

Question 14

What are some advantages of being a sole trader?

Answer 14

Advantages:

• Easy to set up
• Sole trader retains all profits for themself
• Sole trader makes all the decisions

Question 15

What are some disadvantages of being a sole trader?

Answer 15

Disadvantages:

• Can be difficult to raise finance
• Unlimited liability
• Heavy workload

Question 16

How many people can a partnership have?

Answer 16

Partnerships can have a minimum of 2 and a maximum of 20 partners.

Question 17

How is a partnership set up?

Answer 17

A partnership is a business set up by the deed of partnership document.

Question 18

What is the deed of partnership document?

Answer 18

The deed of partnership document sets out the terms of the partnership. For example it states how much money each partner invested in the partnership and what role each partner will have in the partnership.

Question 19

What are some advantages to having a parntership?

Answer 19

• different partners can bring different skills and experience to the business;
• workload and decision-making can be shared between partners;
• larger amounts of finance can be raised compared to a sole trader.

Question 20

What are some disadvantages to a partnership?

Answer 20

• disagreements and arguments can occur when partners don’t agree on a decision;
• profits have to be shared between partners;
• partners have unlimited liability.

Question 21

Do private limited companies have limited liability and what does this mean?

Answer 21

Private limited companies have limited liability, meaning an investor only loses the initial stake if a company goes bust.

Question 22

The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a……

Answer 22

Shareholder

Question 23

How is a limited company private?

Answer 23

when its shares are not available to the public by being bought and sold on the stock exchange.

Question 24

What are some advantages of a private limited company?

Answer 24

• by selling shares - known as a share issue - the business can quickly raise a large amount of
capital;
• control of the company cannot be lost to outsiders;
• shareholders have limited liability

Question 25

What are some disadvantages of a private limited company?

Answer 25

• setting up a private limited company is a much more lengthy and legally complicated process than the other types of private sector businesses; • annual accounts must be produced and shared publicly; • profits have to be shared between shareholders.

Question 26

Public sector organisations are:

Answer 26

• owned by the government; • controlled by elected officials such as MSPs and councillors; • primarily funded through taxation.

Question 27

Third sector organisations are:

Answer 27

• not owned by any one particular individual; • controlled by a board of trustees; • usually funded through donations and fundraising activities.

Question 28

To be accepted as a charity by the Charity Commission, the organisation must prove its actions meet at least one of the four following criteria:

Answer 28

• to relieve poverty; • to advance religion; • to advance education; • to carry out activities beneficial to society.

Question 29

There are many benefits to operating as a social enterprise:

Answer 29

• they help a social or environmental cause; • they can apply for grants and funding only available to social enterprises; • helping a worthy cause will give the organisation a good image which will attract more customers; • they will find it easier to attract high quality staff who want to work for an organisation and make a difference to society; • they might be able to charge a higher price for their products as customers will be willing to pay more if they know the money raised is helping a good cause. Social enterprise: Activity Go online

Question 30

Business plans vary, however many of the common details found in a plan include:

Answer 30

• the business idea - what goods and services will the business provide; • the aims and objectives of the business; • projected costs and profit; • the target market for the business; • how the business will be funded; • the location of the business; • how the business and its products will be marketed.

Question 31

What are the advantages of a PLC (private limited company)?

Answer 31

• Shares are quoted on the Stock Exchange • Business is run by a Board of Directors • Raise large sums of money

Question 32

What are the disadvantages of a PLC (public limited company)?

Answer 32

• Shareholders can freely sell their shares • Firm may be subject to a take-over • Shares can fall in value • Annual Accounts must be published – involves a cost

Question 33

What is unlimited liability?

Answer 33

Someone who is legally responsible for paying the debts of the business

Question 34

What are some of the terms a partnership would agree to?

Answer 34

• how much capital each partner has agreed to put into the business; • the salary for each partner; • how the profits of the business will be split between partners; • the key roles and responsibilities of each partner.

Question 35

What is a social enterprise?

Answer 35

They operate very much like a private sector business except that all profit that is made by a social enterprise is invested into good causes.

Question 36

What is a social enterprises aim?

Answer 36

Social enterprises primarily have a social or environmental aim.