Sectors of Economy - Private Sector

• Sectors of the Economy: Private Sector - Owned by shareholders. Controlled/run by Board of Directors. Financed by Issue Shares.
• Organisations in the Private Sector - Ltd: Features

  • This is a business which is owned by shareholders.
  • This business is controlled by a Board of Directors.
  • There is a minimum of one shareholder.
  • The shareholders invest money into the business by buying shares in it.
  • Shareholders receive a share of the profit and this is known as a dividend.
• Organisations in the Private Sector - Ltd: Features

  • Shares of a private limited company can only be sold with the permission of the other shareholders and directors. They cannot be sold to members of the public on a stock exchange.
  • A private limited company has Ltd after its name.
  • A company is a separate legal body from its owners and so the shareholders have limited liability and can only lose what they have invested in the business.
  • It must register with the Registrar of Companies and produce 2 legal documents - the Memorandum of Association and the Articles of Association.
• Organisations in the Private Sector - Ltd: Advantages

  • Control of company not lost to outsiders.
  • More finance can be raised from shareholders and lenders.
  • Board of Directors brings significant experience to aid decision making.
  • Limited Liability.
• Organisations in the Private Sector - Ltd: Disadvantages

  • Profits shared amongst more people.
  • Shares can't be sold to the general public.
  • Must abide by the Companies Act.
• Organisations in the Private Sector - Plc: Features

  • This is a business which is owned by shareholders.
  • It is controlled by a Board of Directors.
  • There is a minimum of 2 shareholders and a minimum share capital of £50,000.
  • Shareholders receive a share of the profits and this is known as dividend.
  • Shares of a public limited company can be bought and sold on the Stock Exchange.
  • A public limited company has plc after its name.
• Organisations in the Private Sector - Plc: Features

  • A company is a separate legal body from its owners and so the shareholders have limited liability and can only lose what they have invested in the business.
  • It must register with the Registar of Companies and produce 2 legal documents - the Memorandim of Association and the Articles of Association.
  • Plc's tend to be very large and may employ hundreds of employees.
• Organisations in the Private Sector - Plc: Advantages

  • Huge amounts of finance can be raised by selling shares.
  • Plc's often dominate the market.
  • Easy to borrow money due to their large size.
  • Limited liability.
• Organisations in the Private Sector - Plc: Disadvantages

  • Set up costs may be high
  • No control over who buys shares
  • Must publish annual accounts
  • Must abide by the Companies Act
• Business Objectives - Private Sector Organisations

  • To maximise profits
  • To expand the business
  • Survive (break even)
  • Improve quality of goods and services
  • Maximise sales