LO1

• Business activities- tasks completed by a business to achieve its objectives
• Primary activity- extraction and harvesting raw materials. Includes mining, agriculture, fishing, oil and gas extraction
• Secondary activity - purpose is to manufacture product, can be finished products sold to retail customers or components sold to business customers and used in production
• Retail customers- customers who buy finished products
• Business customers- businesses that purchase products or services from another business
• Tertiary activity- the provision of services to the public and businesses
• Public sector - responsible for providing a wide range of public service. Financed via taxation, council tax payments, business rates, licence fees, selling products and services
• Third Sector - Organisations that do not aim to make profit and are not government owned. They rely on fundraising, grants, donations
• Business aims - a summary of what the business wants to achieve in the future
• Recession- A period of economic decline where demand and output fall.
• Economies of scale- cost advantage gained when the size of the business increases.
• Memorandum of Association -A document that states what the company has been formed to do
• Unlimited liability- assets can be freezed or taken away.
• Limited liability- assets are protected
• Sole Trader- One owner, unlimited liability, makes own decisions
• Partnership- two or more owners, unlimited liability, joint control, share profits
• Private Limited Company- Owned by one or more shareholders, shares are only bought privately and the business is incorporated, limited liability
• Shareholder- someone who has an interest in the business
• A memorandum of association is an administrative requirement of a private limited company
• A form 12 is a declaration that all legal requirements of the company registration have been complied with
• Key feature of a public sector organisation- its funded by taxation
• The Companies Act requires a public limited company hold a shareholders meeting at least once a year
• Who’s responsible for day to day decision making in a public limited company - shareholders
• Requirement of the Partnership Act - profits must be shared
• Main business activity of a secondary sector organisation - manufacturing goods
• A community interest company is a social enterprise
• Unincorporated Business- Sole traders and partnerships do not have separate legal identity.
• Advantages of being a sole trader

  • Owner makes all decisions
  • Only needs little capital to start
  • No co-owners to discuss ideas with
  • Easy to set up as few legal requirements
  • Owner has total control
  • Keeps all profits
  • Financial affairs private
• Disadvantages of being a sole trader

  • Lack of more capital (difficult to expand)
  • Lack of continuity (if owner dies the business may close down)
  • Difficult to find cover for holidays/ sick days
  • Unlimited liability(owner responsible for business losses)
  • Have to do multiple jobs in the business
• Reasons for business failure

  • Lack of demand
  • Lack of customers
  • Lack of funds to start the business
  • Supplier issues- can't deliver on time
  • changes in law
  • competition
• Disadvantages of a Partnership

  • Profits are shared
  • Disagreements could affect the service
  • Unlimited liability (owners responsible for business losses)
  • No separate legal identity (owners could be sued)
• Advantages of a partnership

  • Workload is shared
  • Have someone else to discuss ideas with
  • Cover for sickness/ holidays
  • More finance available for investment
  • Easy to set up as little legal requirements
  • Can offer different areas of expertise
  • Financial affairs private (except for tax purposes)
• Incorporated business- the business is separate from the people who own it
• Disadvantage of a private limited company

  • The process takes a long time
  • Shared profit
  • Taxed from the first one pound profit
  • Financial documents are published
• Advantages of a private limited company

  • Raises capital
  • Corporation tax
  • Control over who buys shares
• Public limited company - form of incorporated business owned by shareholders
• Advantages of a public limited company

  • Flotations raise large amounts of capital that can finance expansion
  • Benefit from greater media exposure and may be seen as more prestigious or reputable
• Disadvantages of a public limited company

  • The stability is vulnerable to changes in share price
  • Directors are accountable to thousands of shareholders
  • Attract the media so incidents and public relations are widely reported
• Articles of association- internal rules over including what the directors can do and voting rights of the shareholders
• Aim - Long term and provides overall direction and focuses on the purpose and why of a project