1.2 Types of Business Entities

What are public sector firms?

Public sector firms are owned and controlled by the Government and are usually funded through taxation.

What are private sector firms?

Private sector firms are owned and controlled by other firms and private individuals, and are usually funded by the owner's capital, borrowing and retained profits.

What is privitisation

Privatisation is when government-owned firms are sold to the private sector.

What is the main goal of most public sector firms?

The main goal of most public sector firms is usually to provide a service to the citizens.

Define the term nationalisation.

Nationalisation is when the government takes over ownership of firms that previously operated in the private sector.

True or False? The objective of most private sector organisations is profit maximisation.

True. The objective of most private sector organisations is profit maximisation.

What are merit goods?

Merit goods are beneficial for society but are not provided in sufficient quantities by private businesses, such as education or health services. Governments often provide them to make up the shortfall.

What is meant by the term partial privatisation?

Partial privatisation is when the government retains a share in a privatised firm so they can influence decision-making and receive a share of the profits.

True or False? In recent decades, governments around the world have tended to centralise the provision of key services.

False. In recent decades, governments around the world have tended to move away from the centralised provision of services.

Give an example of a strategically important public sector service.

Examples of strategically important public sector organisations include: The armed forces, Policing, The judiciary, Health services, Education services.

What is a sole trader? + advantages and disdvantages

A sole trader is the single owner of a small business.

Advantages include simplicity in setup and complete control, while disadvantages involve unlimited liability and limited access to finance and skills .

What is a partnership? + advantages and disadvantages

A partnership is formed when two or more people join together to set up and run a business.

Advantages include shared responsibility and more capital, while disadvantages involve shared profits and potential conflicts.

True or False? Sole traders have limited liability.

False. Sole traders have unlimited liability, meaning the owner is personally responsible for any debts the business incurs.

What is a partnership agreement?

A partnership agreement sets out the rules of the partnership, such as its dissolution, how profits are distributed and the voting rights of partners.

Define the term limited liability.

Limited liability is a legal protection for the owners of companies, who are only responsible for business debts up to the amount they have invested.

What are Articles of Association?

Articles of Association set out the rules of a private limited company, including ownership and voting rights of shareholders.

True or False? Public limited companies (PLCs) are subject to less scrutiny than private limited companies.

False. Public limited companies are subject to greater scrutiny than private limited companies.

What is an IPO?

An IPO is an Initial Public Offering, where a company transitions from a private limited company to a public limited company by undergoing a stock market flotation.

What is a public limited company?

A public limited company is a large business that sells shares to the public and is listed on a stock exchange.

What is the main benefit of becoming a PLC?

The main benefit of becoming a PLC is access to significant amounts of capital that can be raised very quickly during flotation.

What is a CEO?

A CEO is a Chief Executive Officer, the highest-ranking person in a company, ultimately responsible for taking managerial decisions.

True or False? Shareholders can sell their shares, transfer ownership or pass them on to heirs.

True. Shareholders can sell their shares, transfer ownership or pass them on to heirs.

Define the term social enterprise.

A social enterprise is a business or organisation that aims to generate revenue as well as achieve social, environmental, or cultural objectives.

True or False? Social enterprises focus on maximising profits.

False. Social enterprises typically reinvest a significant portion of their profits back into achieving their mission rather than maximising profits.

What is a cooperative?

A cooperative is a social enterprise that is owned and run by and for its members, with the principle that working together increases its power.

What is an employee cooperative?

An employee cooperative is owned equally by workers within the business, each of whom has a vote in key decisions.

True or False? Social enterprises in the private sector do not aim to make a profit.

False. Social enterprises in the private sector look to make a profit while improving one or more aspects of society.

What is a community cooperative?

A community cooperative is owned by members of the local community, who usually contribute time as well as finance to the cooperative.

True or False? In a cooperative, each member owns multiple shares and has multiple votes.

False. In a cooperative, each member owns one share and has one vote on key decisions.

True or False? Social enterprises may find it difficult to grow.

True. Social enterprises can find it difficult to grow because obtaining finance to expand into new markets or reach a larger audience is often a challenge.

What is a producer cooperative?

A producer cooperative is a group of manufacturers that work together during the production process, often sharing expensive capital equipment.

True or False? When a member leaves a cooperative, they retain their share and continue to receive benefits.

False. When a member leaves a cooperative, their share is relinquished and they receive no further benefits.

What is a non-profit social enterprise?

A non-profit social enterprise pursues a social or environmental mission while maintaining financial stability - but rarely making a profit or surplus.

What is an NGO?

An NGO is a non-governmental organisation that does not aim to make a profit but seeks to meet a need or provide a service.

True or False? NGOs are typically financed only by government funding.

False. NGOs are typically financed by a combination of government funding and donations from businesses or private individuals.

Give two examples of well-known NGOs.

Examples of well-known NGOs include: Oxfam International, Save the Children International, Amnesty International, Medecins sans Frontieres.

Define the term charity.

A charity is a campaigning organisation with a specific purpose defined by law that relies on donations and fundraising to pursue its aims.

What is the key difference between charities and NGOs?

Charities are regulated by national Charity Commissions and have a relatively narrow scope of operations, such as education. NGOs can have a broader scope and may not always be registered charities.

True or False? NGOs and charities always have regular and stable funding.

False. Funding for NGOs and charities can be irregular, which makes financial planning difficult.

True or False? NGOs and charities can help break families out of poverty.

True. NGOs and charities can help develop human skills in the countries in which they work and this helps to break families out of poverty.