Component 1- 04. Types of ownership

What is the public sector?

Owned and funded by the government. Mainly not -for-profit. Provider of public and merit goods.

What is a private sector?

The private sector includes all those businesses set up by individuals or a group of individuals (including shareholders) most business activity is undertaken in the private sector.

What are public goods?

Non-rival consumption by one doesn't reduce the amount available for others. Non- excludable impossible to exclude others from benefitting from them - only provided by the government for example Street lightings and police defence

What are merit goods?

Provided by both the public and private sectors. Create positive externalities for society. Needed by the public sector to avoid under consumption for example healthcare and education.

Why doesn't the private sector produce public goods?

Because they would mate no profit or any finance frompublic goods.

One way an organisation can be categorised is whether it is incorporated or unincorporated what is unincorporated and incorporated?

Incorporation - the regal process by which the business or company and its owners become a separate identity. When a business is unincorporated which is only for sole traders and partnerships there is no legal difference between the owners and the business when a business is unincorporated the business has a separate legal identity from its owners

What is unlimited liability?

The owners running the business are personally responsible for the business and are personally responsible for any debts the business has, meaning they can lose personal belongings to pay debts back

What is limited liability?

Owners of companies (shareholders) can only lose what they invested into the business is the business was to be in debt

List three advantages of a sole trader

• No legal restrictions - no lengthy setting up period or expensive admin costs

• Independence- can decide everything on own - quicker decisions

• Personal customer service - creates loyal customers

• List three disadvantages of a sole trader

• Unlimited liability

• Limited capital - may be difficult to start up business with little capital

• Workload /pressure - all on one person difficult to have days off

• List three advantages of a partnership

• Not all responsibility on one person

• Less workload with multiple people

• More capital being brought into the business - easier start up

List three disadvantages of a partnership

• Takes longer to make decisions

• Not much flexibility

• Unlimited liability

How many people are in a partnership?

Between 2-20

What is a private limited company?

Company shares can only be transferred privately and all shareholders must agree on the transfer

What is a public limited company?

Trade shares on the stock market anyone over the age of 18 can buy shares.

advantages of a private limited company? 

• limited liability 

• seperate legal identity 

• les arguments, everyone is invited in 

• capitial can be raised by selling shares 

• possible tax advantages for owners 

disadvantages of a private limited company?

• finance is limited

• more paperwork

• profits are shared with all shareholders

• could be conflict

• legal procedure setting up

advantages of a public limited company?

• legal identity

• anyone over 18 can buy shares - potential for lots of shareholders - lots of investments

• limited liability

• production cost might be lower

• pressure from shareholders - can motivate directors

disadvantages of a public limited company?

• profit is shared over many people

• business cannot control who invests

• potential of a hostile take over - someone new has got over 50% of the business

• set up costs can be very expensive

• cannot deal with customers on a personal level

What is a not-for-profit organisation and what are their main aims?

Businesses that do not aim to earn profit They are charities, co-operatives, societies, and social enterprises

what is a charity?

Charities are established with the aim of collecting money from individuals and spending it on a cause. They exist to raise money for ‘good’ causes and draw attention to the needs of disadvantaged groups in societies.

what is a co-operative?

A worker co-operative is a business owned and democratically controlled by the people who work in it.

They have the objective of: · Creating and maintaining sustainable jobs

improving the quality of life of the worker-members,

allow workers’ democratic self-management and

promote community and local development.

what are postivie aspects of worker co-operatives

• high levels of employee participation 

• increased levels of motivation 

• higher levels of creativity 

• provide stable income 

• lower level of sickness 

what are the negative aspects of worker co-operatives

• may take longer to set up

• more difficult to raise finance

• if its not organised decisions may take time

• conflict has to be well managed

what are societies?

owned by its members or its customers, rather than its shareholders, profits go straight back to the members/customers to help give them better rates on finance/mortgages i.e. cheaper products

what is a social enterprise? 

businesses with clear social objectives, Social enterprises trade to help solve social problems, improve the communities they operate in, and improve the environment. They aim to make profits but then they reinvest these profits, towards achieving their social objectives.