General A level business

• Sole trader


  A business that has a maximum of just one owner
• A sole trader may only have one owner of the organization but can hire employees
• Sole traders


  • One person gets to keep 100% of any profit made
  • They have 100% control of their organization
  • They have minimal government bureaucracy to complete
• Taxes for sole traders


  • They pay income tax rather than corporation tax
  • They have a tax-free allowance before paying income tax
• Unlimited liability


  • In the event of business closure, the owner remains liable for any debts of the business
• Partnership


  A business that is owned by two or more people, typically 2 to 20 partners
• Partnerships


  • Unincorporated businesses - not formally registered as a separate legal identity to the owners
  • Compared to sole traders, have more than one owner contributing startup capital
  • Partners can contribute different skills and expertise to the business
  • Partners can share the pressure and responsibility of running the business
  • Less bureaucracy and reporting requirements than limited companies
• Tax for partnerships


  • Partners pay income tax rather than the business paying corporation tax
  • Partners have a tax-free allowance of £12,500 before paying tax
• Deed of partnership


  A document that lays out a framework for how the partnership will operate, to help resolve disputes
• Limited liability partnership


  A rare form of partnership where some partners have limited liability, usually silent/sleeping partners who contribute capital but are not actively involved
• Franchise


  Permission, the legal right to start a business using another organization's name, branding, and products
• Franchises


  • Use another organization's business concept, name, branding, and logo
  • Sell the franchisor's product range
• Franchisors want franchisees to succeed and will provide support and advice
• Franchises benefit from the franchisor's national marketing campaigns
• Franchisees have to charge the prices set by the franchisor and sell the products/services provided
• Franchisees have little freedom to be creative and develop their own business ideas
• Private Limited Company (Ltd)


  A business that is owned by a group of shareholders, where each shareholder is protected by limited liability
• Limited liability


  • Legal protection for shareholders, where their personal assets cannot be used to pay off the business's debts in the event of bankruptcy
• Advantages of Ltd companies


  • Easier to raise capital by taking on new shareholders
  • Pay corporation tax rather than income tax, which is lower for profitable businesses
  • Can control who buys shares in the company
  • May be perceived as more reputable due to formal registration process
• Limitations of Ltd companies

  • Profits have to be split between multiple shareholders
  • Smaller companies miss out on tax-free personal allowance
  • Greater bureaucracy and rules to follow when forming and running the company
  • Financial accounts are public record
  • Limited ability to raise capital compared to public limited companies (PLCs)
• Ltd companies can have as few as one shareholder
• With PLCs, shares can be traded publicly on the stock exchange, allowing greater potential for raising capital
• With Ltd companies, shares can only be traded privately to people known to the existing shareholders
• Supply


  The amount of a particular good or service that the producers in that marketplace are willing to supply or create
• The general rule of supply is that producers will want to produce more of a product when they are confident that they can achieve a higher price
• Factors determining the level of supply


  • Cost of production (rents, raw materials)
  • New technology
  • Taxes and duties
  • Subsidies
  • External shocks (natural disasters, weather, political situations)
• Costs of production rise


  Discourages firms from wanting to produce those goods and services
• New technology arrives in an industry

  Firms might be attracted to supply more in that market
• Taxes and duties rise

  Firms will be more cautious about wanting to reduce output for that market
• Taxes and duties are lower


  Encourages more production, stimulates greater supply
• Subsidies are offered


  Encourages more firms to want to produce in that market, firms will want to increase production to access more subsidies
• External shocks (natural disasters, weather, political situations)


  Can affect the level of supply in the market
• Piecework


  Paying workers not by the hour but by the pieces of work they produce, to stimulate greater productivity
• Commission


  Rewarding workers with a percentage of any sale they make for the organization, to stimulate sales
• Bonuses


  Additional financial rewards for achieving certain performance thresholds, such as output or sales targets
• Profit sharing


  Distributing a percentage of the business's profits amongst the workforce, to motivate staff to contribute to profitability
• Performance-related pay


  Linking pay progression to the achievement of targets set during performance reviews, to motivate staff to meet their goals
• Profit sharing


  May be less effective at motivating staff throughout the year, as the focus is on the months leading up to profit announcement
• Performance-related pay


  May lead staff to neglect other aspects of their job, as they prioritize the targets they know they will be financially rewarded for
• Non-financial methods of motivating workforce


  • Greater levels of delegation
  • Utilising consultation in the workplace
  • Team working
  • Flexible working practices
  • Empowering workers