Types of organisations

Question 1

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

Answer 1

• Sole trader (A business controlled and owned by one person)
• Partnership (An organisation owned by 2-20 people)
• Private limited company (ltd) (A business that sells shares privately to invited members)
• Public limited company (plc) (A company where shares are offered to the public)
• Multinational
• Franchise

Question 2

Sole trader

Answer 2

They are usually small in size. Hairdressers, butchers, and electricians often operate as a sole trader.

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

Question 3

Advantages and disadvantages of sole traders

Answer 3

• Easy to set up ——- Can be difficult to raise finance.
• Sole traders retains all profits for herself/himself ——– Unlimited Liability.
• Sole trader makes all the decisions —— heavy workload.

Question 4

partnership

Answer 4

A partnership is an organisation owned by 2-20 people.

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

A deed of partnership is a written agreement outlining the rules of the partnership. I.e. it states how much money each partner invests into the partnership and what role they’ll play running it.

A partner who invests money into the partnership but does not a day-to-day role in running the partnership is called a sleeping partner.

Question 5

Advantages and disadvantages of a partnership.

Answer 5

• More equity avaible to finance the business compared to sole traders —— unlimited liability.
• Different partners can bring different skills —– profit is shared between partners.
• Workload is shared ——– partners may not always agree on desicians made for the business.

Question 6

Private limited company

Answer 6

• Companies often need to grow larger than the initial 20 partner allowed. One way of doing this is becoming a limited company, as ltd has limited liability, meaning in the company goes bust only investor will take the initial stake.

Question 7

Advantages and disadvantages of a ltd

Answer 7

• Owner can retain control ———- must be registered with the Registrar of Companies.
• More able to raise money —— High set-up costs (legal and administrative)
• Limited liability ——- Harder to motivate and control workers.

Question 8

Public limited company (plc)

Answer 8

• A business that offers shares to the public.
• Must share capital of £50,000 at least.
• Must have two shareholders, two directers, and a qaulified company secretary.

Question 9

advantages and disadvantages of public limited company:

Answer 9

• raise more money by selling shares on the stock exchange —– disagreemnets over how the company is run.
• easier to growth and diversify ——- threats of takeover
• difficult to persure objective than increasing profit.

Question 10

reasons why companies may want to go multinational

Answer 10

• increase market share
• secure cheaper premises and labour
• avoid taxes and trader barriers
• government grants

Question 11

What is third sector organisations catagorised into:

Answer 11

• charities and community groups
• social enterprises

Question 12

Charities

Answer 12

• Charities are an organisation set up for a specific cause.
• Charities receive grants from fund raising organisations such as the National Lottery. Money is also raised in charity shop sales or public donations.

Question 13

Community Groups

Answer 13

Community groups exist to provide service to people. They are a non-profit and all profits go back into the organisations to ensure it is kept running.

Question 14

Social enterprise

Answer 14

A social enterprise is an organisation that exists with a clear goal to help the community but runs the organisations like a business. All profits are reinvested back into the organisation.