Business Unit 1.4 ; Types of Business Organisations

Private sector

Business owned and operated by private individuals or groups with the great intention to make a profit.

Public sector

Business owned and operated by the state to improve the standard of living

Reasons for Public Corporations

Essential Services , Impossible to charge , Provided by the law

Soletrader

A business which is owned and operated by 1 individuals

Liability

Anything a business owes

Unlimited liability

The owner is responsible for the business’ debts

Limited liability

The business has a separate legal identity and hold responsible for the business’ debts. The owners are not responsible for this.

Partnership

A form of business which is privately owned by 2 or more people

Sleeping partner

Investors that expect to be paid in portions of profit

Deeds of partnership

A legal agreement of the terms and conditions of a partnership, signed by all partners

Limited Company

A business organisation with limited liability where the ownership is broken down in shares which are sold to raise finance

Private limited company

=> Can decide who it sell shares to

=> Usually small - family run

=> Little security ( hard to raise capital )

Public limited company

=> Can float shares on stock exchange

=> Larger Scale

=> Have to sell shares to anyone who applied

=> Able to generate a very large sums of capital

Hostile Takeover

If a shareholder owns 51% of the company

Franchises

When a business ( franchisor ) gives another business ( the franchisee ) the right to supply its products or services

Market Saturation

Too many outlets

Cost Effective

When Revenue > Cost of materials

Joint venture

When 2 or more businesses work together to complete a project - forms a 3rd organisation while the initial businesses are separate

Factors that affect the type of business structure used

The numbers of owners

The role of the owner

The owner’s attitude to risk

How quickly the owner wants to start operating the business

The potential size of the business