3: Sole traders, Partnerships, Social enterprises, and Franchises

Entrepreneurs:

Innovators: they try to make money out of business ideas. Such ideas can come from spotting a gap in the market, a new invention or market research.
Organisers: they are responsible for organising other factors of production. They hire or buy resources such as materials, labour or equipment. Organising involves giving instructions, making arrangements, and setting up systems.
Risk takers: they risk any money put in the business and possibly more if it fails. However, if the business succeeds, they earn profit.
Decision makers: they make decisions on how to raise finance, product design, choice of production method, prices, recruitment, and wages.

Unincorporated and incorporated business:

Unincorporated:

These are businesses where there is no legal distinction between the owner and the business. Everything is carried out in the name of the owner. These tend to be small and owned by one person or a small group of people.

Incorporated:

One that has a separate legal identity from that of its owners. The business can sue, be sued, taken over or liquidated. They are often called limited companies and are owned by shareholders.

Features of a sole trader:

It has one owner but can employ any number of people. They are involved in a wide range of business activities (in the primary, secondary and tertiary sector).

Features of a partnership:

It exists when between 2 and 20 people own a business together. The owners share responsibility for running the business as well as profits.

Deed of partnership:

How much capital each partner will contribute
How profit (and losses) will be shared among partners
The procedure for ending the partnership
How much control each partner has
Rules for taking on new partners.

Limited partnership:

This is where some partners provide capital but take no part in management of the business. Such partner will have a limited liability.

Features of Franchises:

Owners of franchises are called franchisors. They have developed a successful business and are prepared to allow others, the franchisees, to trade under their name.

What does the franchisor offer the franchisee?

A licence to trade under the recognised brand name of the franchisor
A start-up package including help, advice and essential equipment
Training in how to run a business and operate the systems used by the franchise.
Materials, equipment and support services that are needed to run the business
Marketing support that is organised on behalf of all franchisees
An exclusive geographical area in which to operate.

Franchisees have to pay certain fees:

A one-off start-up fee
An ongoing fee (usually based on sales)
Contribution to marketing costs
Franchisors may make a profit on some of the materials, equipment and

merchandise supplied to Franchisees.

Features of social enterprises:

Non-profit organisations. They aim to improve human and environmental well-being rather than make profit for the owners.

They have a clear social and/or environmental mission
Generate most of their income through trade or donations
Reinvest most of their profits
Are majority controlled in the interests of the social mission
Are accountable and transparent

Cooperatives:

They usually operate as consumer or retail cooperatives. They are owned and controlled by their members. Members can buy shares which entitles them to elect directors to make key decisions. Any profit made is given to the members.

Work Cooperatives:

Businesses in which its employees share ownership. Workers will contribute to production and be involved in decision making, share in the profit and provide some capital when buying a share in the business.

Charities:

They exist to raise money for ‘good’ causes and draw attention to the needs of disadvantaged groups in society and raise awareness about issues. Charities rely on donations for their revenue. May also organise fundraising events to raise money.