Sectors of Economy

types of organisations in sectors of economy

Private limited companies-

Private limited companies are owned by private individuals or shareholders.

Private limited companies are controlled by a board of directors which are appointed by shareholders.

Private limited companies are funded by selling shares or using more personal or other methods of finance.

Advantages: shareholders of a private limited company have limited liability. This means that if their business goes bust, they do not lose any personal funding’s like savings or your home.

A business being run by shareholders means that a variety of different skills and opinions are brought to the business. This means that they can expand the business quicker do to more and a wider range of thinking.

Shareholders also share their workload. This is good as it means a singular person does not have to work too hard, and everyone earns a fair amount of money because of their work ethic.

Disadvantages- being a shareholders in a private limited company is that shareholders have to share  the profits they earn with each other. This means that you do not get paid based on your job performance so you cannot earn more money, and it also means that the money you do earn isn’t that much depending on how many shareholders are in the business and the profits you earn.

Shareholders may disagree and argue about the business because of the concept of shared ideas. Arguments may affect and strain the business and therefore profits could be at risk of lowering.

In private limited companies, they must register with the Registrar of Companies and this is expensive and personal.

Private limited companies cost a lot to start up both legally and administratively so therefore people may not be able to afford to start their own business.

Public limited companies-

Public limited companies are owned by shareholders

Shareholders in public limited companies purchase shares on the stock exchange market.

Public limited companies are run by a board of directors appointed on behalf of the shareholders.

Advantages- public limited companies raise more money by selling shares on the stock exchange market this means it’s easier to raise more money than other companies that aren’t public limited companies.

Public limited companies are easier to grow and diversify because anyone can buy shares of the stock exchange market this means that it is easy to buy into a business.

 

Disadvantages- shareholders in a public limited company may have disagreements over the best way to run the company. This might be cause of the wide range of diversity in plc’s and the big difference there may be in opinions because of this.

Public limited companies have the threat of being taken over. This is because, if one person buys all of the shares on the stock market, they will own more of the business than anyone else. This means it is easy to lose your business if anyone can fight over it.

Another disadvantage of plc’s is that it is difficult to accomplish any other objectives other than owning money. This is because most people who buy shares aren’t as interested in making the business better as they are in earning the money from the business. Being collective decisions on things that don’t make shareholders profit may be difficult.

Franchises-

 a franchisor is paid a fee and supplies all the products, training and systems to the franchisee.

A franchisee is allowed to use the business name and provide their products and services.

Multinationals-

Multinationals are companies that have their headquarters in one country, but their assembly or production facilities in other countries.

This may be to: increase the market share of the company

To secure cheaper premises and labour which means that in certain countries, you can pay workers less for their labour to create the same product that would be more expensive elsewhere.

To avoid tax or trade barriers. In some places, the taxes in order to sell products from a company are cheaper than where the headquarters is set.

Some governments give businesses grants in order to produce their product in their country.

 

Advantages- multinationals create new jobs and this boosts the economy

Multination’s means it’s easier to bring expertise into the business and improve skills on the workforce

Multinationals benefit from economies of scale because of the scale their businesses operate in as well as it divides the workload.

Multinationals gain technical economies which means the costs overall are lowered because of the value of productions

Multinationals achieve discounts on the resources they buy because of how loyal they are and because they buy in bulk.

Disadvantages- multinationals are accused of relying on jobs that may be low paid and repetitive assembly line work.

Multinationals don’t keep profits in the host country which is complicated in business

Multinationals cut corners and social responsibility may be overlooked.

Multinationals are accused of exploiting the workplace and the environment because of things like minimum wage in struggling countries.

Multinationals may exert political muscles in which they hold power over a country because of their business.

Sole traders- a business usually owned by one person.

Funding from bank loans or personal funding’s.

Advantages- it’s the easiest business to legally sign up.

Sole traders keep all of the profits they make.

Sole traders make all of their own business decisions.

 

Disadvantage- unlimited liability means they may lose personal belongings in debt.

Sole traders tend to work for longer hours.

Sole traders have a much heavier work load than any other business.

Partnerships-

Owned by 2-20 different individuals.

The partners control all business decisions.

Financed by profits of the business, loans or personal savings.

Advantage- partnerships have more varied ideas because of more people.

They share a workload and are not as stressed as sole traders.

They have more money and funds to place into the business for a turnout.

 

Disadvantage-partnerships have unlimited liability so they may lose personal belongings in debt.

Profits are shared in partnerships so you may not earn as much money as you do in a sole trader business.

Public sector:

 

Owned by the government.

Controlled by government elected officials or appointed directors.

Funded by taxpayers.

Third sector:

Charities and social enterprises

Owned by trustees.

Controlled by a board of trustees

Funded by donations, grants and profits from the business.