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Private Sector
The part of the economy owned and controlled by private individuals or organizations.
Public Sector
The part of the economy owned and controlled by the state or government.
Ownership and Control (Private Sector)
Private citizens and firms own enterprises, requiring shares purchased by individuals.
Ownership and Control (Public Sector)
Owned by taxpayers and operated by national/local governments.
Objective of Private Sector
To earn and make profits.
Objective of Public Sector
To provide essential goods and services to the public.
Source of Capital (Private Sector)
Private individuals
bank loans
personal savings.
Source of Capital (Public Sector)
Funds from taxes
government loans
donor agencies.
Insolvent
Unable to repay debts or bankrupt.
Liquidate
Selling off assets to repay debts.
Liability
The obligation borne by the owners or shareholders, such as debts.
Limited Liability
Shareholders are not personally responsible for business debts beyond their investment.
Unlimited Liability
General partners and sole proprietors are fully responsible for all business debts.
Incorporated
A business registered as a separate legal entity from its owners.
Unincorporated
A business where the owner is personally responsible for its debts.
Nationalization
When the government assumes control of a business to provide public services.
Privatization
The transfer of public sector assets to private ownership.
Public Corporation
Government-owned entities that may operate for profit.
Sole Trader
A single business owner who makes all decisions and bears all risks.
Characteristics of Sole Trader
Manages the business alone
enjoys all profits
and bears all risks.
Advantages of Sole Trader
Enjoys all profits
ease of formation
independence
personal control.
Disadvantages of Sole Trader
Limited finance sources
unlimited liability
risks tied to personal health.
Partnership
A business formed legally by at least two but no more than twenty persons.
Limited Liability Partnership
At least one partner has unlimited liability while others have limited liability.
Ordinary/General Partners
Active partners with unlimited liability and shared management.
Sleeping Partners
Partners who invest but do not participate in management.
Limited Liability Partners
Partners protected from losing assets beyond their investment.
Partnership Deed
A written agreement outlining terms, roles, and responsibilities of partners.
Partnership Advantages
More capital
specialization
simplicity in organization
shared workload.
Partnership Disadvantages
Unlimited liability
binding errors
limited capital
risk concentration.
Limited Liability Companies
Incorporated business entities protecting owners' assets from company debts.
Private Limited Liability Company
Company that restricts share purchases to private individuals or groups.
Public Limited Liability Company
Company with shares traded publicly on stock markets.
Characteristics of Private Limited Company
Limits on shareholders
privacy in financial statements
'Ltd.' suffix.
Advantages of Private Limited Companies
Larger capital base
continuity
limited liability
privacy.
Disadvantages of Private Limited Companies
Restricted share selling
limited capital
slower decision-making.
Public Limited Companies Characteristics
Unlimited shareholders
traded shares
‘PLC' suffix.
Advantages of Public Limited Companies
Easier financing
limited liability
growth capability
shared risk.
Types of Shares
Categories of ownership in a company, including ordinary and preference shares.
Ordinary Shares
Shares carrying voting rights, representing ownership of the company.
Preference Shares
Shares receiving dividends before ordinary shares, usually without voting rights.
Debenture
A loan to a business without collateral, relying on creditworthiness.
Disadvantages of Public Limited Companies
High legal costs
public financial reporting
potential loss of control.
Cooperatives
Business entities owned and controlled by their members for mutual benefit.
Principles of Cooperatives
Open membership
democratic control
limited interest
profit distribution.
Types of Cooperatives
Includes:
consumer
producer
financial
services
worker cooperatives.
Advantages of Cooperatives
Employment creation
democratic management
shared profits among members.
Disadvantages of Cooperatives
Limited capital input
potential lack of management expertise.
Consumer Cooperatives
Retail cooperatives where members buy goods to benefit from lower costs.
Producer Cooperatives
Groups of producers (like farmers) pooling resources for efficiency.
Cumulative Preference Shares
Shares that accumulate unpaid dividends to be paid in the future.
Certificate of Trading
Permission for public companies to begin trading after meeting legal requirements.
Statutory Declaration
A formal statement declaring something to be true for legal purposes.
Prospectus
A document inviting the public to buy shares, detailing company prospects.
Limited Interest on Capital
Low return rates on investments made by cooperative members.
Surplus Distribution
Sharing excess profits among cooperative members based on participation.
Democratic Controls in Cooperatives
Members govern cooperatives through elections and meetings.
Limited Capital in Cooperatives
Capital contributions restricted by membership and participation.
Employment Creation in Cooperatives
Cooperatives generate jobs and promote economic stability for members.
Decision Making in Partnerships
Collaborative process that may suffer from disagreements.
Continuity in Business
The ongoing existence of a company despite changes in ownership or management.
Personal Control in Sole Traders
Sole owners make quick decisions without external influence.
Ease of Formation in Sole Traders
Minimal legal requirements to start and operate a sole proprietorship.
Financial Reporting in PLCs
Mandated public disclosure of financial statements and performance.
Legal Identity of Companies
The ability for companies to act as separate entities in legal matters.
Voting Rights of Shareholders
Ordinary shareholders' ability to influence company decisions.
Conflict Resolution Procedures
Agreed upon methods to handle disputes among partners.
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