1.2: Types of business organisation

Question 1

Sectors of the economy
Private, public and third sectors

Answer 1

Private sector: Business or organization created by one or more individual. Profit is for them.

Public sector: The government is the owner, its operate by the nation taxes. Citizens benefits from these services.

Third sector: Non profit organizations. NGO volunteers, trustees

Question 2

Explain the advantages and disadvantages of both a large private sector and a large public sector

Answer 2

Large private sector: private companies with more than 500 employees. ex: pandora
Advantage: Low prices, exponential growth and development
Disadvantage: Focus on the profit so no renewable resources, Unemployment when profit falls

Large public sector: governmental services. ex: military, law enforcement, infrastructure, public transit, public education
Advantage: Essential services are provided for people, for free or at low cost, sustainable jobs, care is given to the environment
Disadvantage: more inefficient, limited resources, no growth

Question 3

Sole trader advantages and disadvantages

Answer 3

Sole trader:
- Business owned by one individual.
- small business, close to the customer
- finance is usually limited, finance documents remain private
Advantages:
- Complete control of decisions, no profit sharing
Disadvantages:
- Unlimited liability, higher prices, sole responsibility, competition

Question 4

Partnership advantages and disadvantages

Answer 4

Partnership:
- Business owned by 2- 20 people
- common partnerships: Lawyers, doctors, vets
- Decisions are made by all the partners
- sleeping partners (no decision making)
- offer a more varied service

Advantages:
- Increase capital, diverse specialization, risk and responsibilities are shared

Disadvantages:
- unlimited liability, Limited number of partners, profit share

Question 5

Private limited company advantages and disadvantages

Answer 5

Private limited company:
- Companies whose shares are private, not in the stock market
- have a board of directors, at least one director and one shareholder

Advantages:
- Share holders have limited liability, no limited number of shareholders

Disadvantages:
- Cannot sell share to the public, public financial information

Question 6

Public limited company advantages and disadvantages

Answer 6

Public limited company:
- A large business whose shares are available for purchase, to the public, on the stock market.
- must have minimum 2 directos, 2 shareholders, 1 company secretary

Advantages:
- More money can be produce due flotation on the stock market, Opportunity to dominate the market, more secure company so lenders are more likely to
provide finance.

Disadvantages:
- longer setting up process, no control of who buys the shares, no privacy of documents

Question 7

Describe the following for third sector along with the main advantages and disadvantages of each:
Charity

Answer 7

Charity: A organisation whose aim is to provide for those in need. Regulated by the government, it has a charity Number

Advantages:
- Tax exemption means more money can go directly to the cause

Disadvanatges:
- founding can be with draw causing irregular donations,

Question 8

Describe the following for third sector along with the main advantages and disadvantages of each:
Social enterprise

Answer 8

Social enterprises: aim to tackle social or environmental issues in society, e.g. homelessness
- They are profit making organisations, sell goods and services
- Most of the profits made are reinvested into the local community (at least 50%)
Funded through grants, loans and retained profits
- The main objective is to generate an income to tackle a social cause