Unit 1.2 business

• Private sector


  Businesses owned by and controlled by individuals or groups of individuals
• Public sector


  Organisations accountable to and controlled by central or local government (the state)
• Activities in the public sector

  • Education
  • Health care
  • Fire Service
  • Law Enforcement
  • Social Services
  • Public Transportation
  • Postal Service
  • Waste Management
  • Accountancy
  • Disney
  • Designers
  • Retail
  • Coffee Shop
• Profit-based organisations


  Organisations that aim to generate profits
• Non-profit based organisations


  Organisations that do not aim to generate profits
• Sole Trader


  • Business owned and operated by one person, although they can employ staff
  • For-profit
  • Disadvantages: No one to discuss business matters with, Unlimited liability, Likely to remain small, Lack of specialist skills, Lack of continuity
  • Advantages: Owner has complete control, Close contact with customers, Incentives to work hard, Can choose holidays, pay, breaks
• Partnership


  • Group or association of 2 or more people who agree to own and run a business together
  • For-profit
  • Disadvantages: Disagreement between partners, Unlimited liability, One partner could be unreliable or dishonest
  • Advantages: Share expenses, responsibility and decision making, More capital available, Individual partners can offer specialisms, Continuity
• Share


  A certificate confirming part ownership of a company and entitling the shareholder to dividends and certain shareholders rights
• Dividends


  A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves)
• Shareholders


  Individuals or institutions that buy/own shares in a limited company
• Limited liability


  The only liability - or potential loss - a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder (unlimited liability for sole traders)
• Privately held companies (Private Limited Company)

  • Number of shareholders contribute funding the company in return for shares, Shares can't be sold on the Stock exchange market
  • For-profit Corporation
  • Disadvantages: Expensive to set up, Shares can't be sold to the public, Accounts have to be available for public inspection, Less privacy, Shares can't be sold without agreement of other shareholders
  • Advantages: Limited liability, Easier to raise capital, Owners can retain control, Management is shared, More specialization can occur
• Publicly held companies (Public Limited Company)

  • Unlimited number of shareholders contribute funds to the company in return for shares, Shares can be sold on the Stock exchange market
  • For-profit Corporation
  • Disadvantages: Vulnerable to takeovers, Shareholders receive some of the profit, Annual accounts have to be published in full, May have communication and management problems due to size
  • Advantages: Limited liability, Easier to raise finance, Continuity, High degrees of specialisation
• For-profit social enterprises use commercial business practices in order to achieve social goals, such as improving the environment, building better communities and developing social wellbeing
• For-profit social enterprises are not traditional charities, as they need to earn a profit (or financial surplus) in order to survive, unlike traditional charities that rely on donations
• Types of for-profit social enterprises

  • Private sector companies
  • Public sector companies
  • Cooperatives
• Private sector for-profit social enterprise - Change Please

  • Hires and trains homeless people to become baristas, provides London-living wage job, housing, bank account, and therapy support
• Public sector social enterprises operate in a commercial-like way (selling goods and/or services in order to generate a financial surplus) but are wholly or partially owned and/or controlled by government authorities
• Advantages of public sector social enterprises: fewer risks involved as the product is provided by the government, help to reduce the debt burden of the economy and taxpayers in particular by being able to charge for their services
• Advantages of public sector companies

  • Fewer risks involved as the product is provided by the government
  • Help to reduce the debt burden of the economy and taxpayers by being able to charge for their services
  • Create secure employment opportunities and have a positive impact on local communities and the country's overall economic growth and development
• Limitations of public sector companies

  • Expensive to operate with unpredictable rates of return on investments
  • Difficult to persuade private sector partners or investors to help fund them
  • Associated with bureaucratic policies and procedures, causing inefficiencies and delays to decision making
• Co-operative (co-op)


  A business jointly owned and controlled by people who came together with the same needs, owned by the people who use it and managed in their best interests
• Disadvantages of co-operatives


  • May not have good management as employees run the business themselves
  • Hard to raise external finance if needed
  • May be a lot of disputes and disagreements among employees
• Advantages of co-operatives


  • Easy to form as there are no legal formalities
  • Cooperatives have limited liability
  • Members are provided with cheaper goods
  • Continuity - the coop will continue even if someone leaves
• Registered charities


  Often called non-profit organizations, must be registered and approved by a Charity Commission, and must be established and operate exclusively for charitable purposes
• Non-profits


  Do not need to operate exclusively for charitable purposes, can operate for social welfare, civic improvement, pleasure, sport, recreation or any other purpose except for profit
• Non-governmental organization (NGO)


  A citizen-based association that operates independently from the government, usually to deliver resources or serve social or political purposes
• Disadvantages of NGOs


  • May not have good management as employees run the business themselves
  • Hard to raise external finance if needed
  • May be a lot of disputes and disagreements among employees
• Advantages of NGOs


  • They are flexible in adapting to local situations and responding to local needs
  • They have the ability to communicate at all levels
  • They are able to recruit both experts and highly motivated staff with fewer restrictions than the government
• Charities


  Organizations set up to provide help and raise money for those in need
• Disadvantages of charities


  • The charity's activities cannot benefit anyone with whom you have a relationship
  • Registered charities will also be prohibited from carrying out any political activities
  • Registering as a charity can dramatically increase the amount of paperwork
• Advantages of charities


  • Increased level of trust in your organisation
  • Many suppliers and other organisations will give preferential treatment to registered charities
  • Registered charities also enjoy a range of tax benefits that are not available to unregistered organisations
• Companies (corporations)


  Any business organisation that is owned by its shareholders, who have limited liability, comprising privately held companies and publicly held companies
• Cooperatives


  For-profit social enterprises owned and run by their members (usually employees, managers or customers), with the primary goal of creating value for their member-owners
• Deed of Partnership


  A legally binding contract that all joint owners of a partnership sign, stating the purpose of the business, the formal rights of the partners, and how any profits should be split
• Incorporation (incorporated)


  There is a legal difference between the owners of a company (the shareholders) and the business entity itself, ensuring that the owners are protected by limited liability
• Initial public offering (IPO)

  An IPO occurs when an organization sells all or part of its business to shareholders on a public stock exchange for the first time, changing the legal status of the business to a publicly held company
• Limited liability


  A legal status of a business that enables its shareholders (business owners) not to be liable for more than the original amount of money invested in the business
• Limited partnership


  A special type of partnership where one or more partners contribute capital and enjoy a share of the profits but do not participate in the running of the business, with at least one partner still having unlimited liability
• Non-governmental organizations (NGOs)


  A type of non-profit organization (NPO) operating in the private sector of the economy for the benefit of others in society (rather than for shareholders)