UB: types of business organisations Flashcards
what are the main features of a private sector organisation?
- driven by profit
- profits benefit owners, shareholders and investors
- finaced by private money from shareholders
- financed by bank loans
what are the main features of a public sector organisation?
- owned by the government
- provide goods and services for the benefit of the community
- run by the government
- operate with money raised from taxes
what are the main features of a third sector organisation?
- owned and voluntarily run by trustees
- not run by the need to make profit but run by the need to help the community
- operate with money from donations and gifts
- any profits are reinvested back into the organisation
what are the main features of a sole trader organisation?
- owned and controlled by one person
- rely on personal savings, bank loans or loans from family and friends to finance their business
what are the advantages of being a sole trader?
- legallyeasy to set up as there is less rules and regulations then other types of organisations
- sole traders keep all profit for themselves
- sole trader makes all the decisions
what are the disadvantages of being a sole trader?
- unlimited liability making the sole trader liable for the organisations debt, this means that personal assets such as a car or house are at risk of being sold to pay off debt
- finance can be difficult to raise as they may not be able to get a bank loan etc
- heavy workload as they have to shoulder the full burden of responsibility for their business, and often try to keep labour costs low by avoiding delegating others to tasks
what are the main features of a partnership?
- minimum of 2 partners, maximum of 20 partners
- a partnership is set up by the deed of partnership document
what does the deed of partnership document involve?
- sets out the terms of the partnership
- for example it states how much money each partner invested and what role each partner will have in the partnership
what is a sleeping partner?
a partner who invests but is not involved in the daily running of a partnership
what are the advantages of a partnership?
- can raise more money than sole traders as banks are more likely to lend money to an organisation that has many partners
- different partners bring different skills
- workload and responsobility of the business can be shared between partners
what are the disadvantages of a partnership?
- partners may disagree and argue over the future and decisions of their business
- any profit made is shared between 2-20 people
- unlimited liability giving all partners the worry of being liable for any debt
what are the main features of a private limited company?
- 2-50 shareholders
- limited liability: shareholders are only liable for the amount they invested or the shares they own
- owned by shareholders
- controlled by a board of directors elected by shareholders
what are the advantages of a private limited company?
- able to raise money by borrowing and through the share issue of ordinary shares
- limited liability
- shareholders/owners tend to be supportive family members
- profits are only shared between shareholders (they recieve this as a dividend)
what are the disadvantages of a private limited company?
- must be registered with the registrar of companies
- legal set up costs are expensive, limited companies must use documents called memorandum of association and articles of association
- because profits are only shared with shareholders it is harder to motivate and control workers who do not hold shares
what are examples of ways public sector organisations raise money?
- income tax
- national insurance
- VAT
- fuel duty
