Business Unit 1.2

Question 1

Private vs Public sector

Answer 1

Private vs. Public sectors
 Private Sector
 Goal is to make profit
 Owned, financed and run by private individuals or entities
 Public Sector
 Goods and services provided by the government or local authority
 May be free or sometimes with a small fee
 e.g. public hospitals, museums, etc.

Question 2

Types of for-profit/commercial organizations. Name the main features of for profit (commercial organizations). Difference between them. Who is responsible for debt?

Answer 2

Sole trader
 Business that is completely owned and controlled by just one person
 Simplest form of business
 Owned by a single person who assumes all profits and liabilities
 Advantages
 Little legal requirements for setup
 All the income goes to one man
 Less restrictions and easy decision-making
 Disadvantages
 All the income tax is shouldered by one man
 Unlimited liability (owner is the same legal entity as the business)
and all the debt incurred by the business is put on the owner

 Partnership
A partnership is a profit-seeking business owned by two or more persons
 Company ran by two or more individuals who form a partnership
 Each person contributes money and resources, as well as sharing the
responsibilities of managing a business.
 Turns into a corporation if there >15 partners and will pay corporate tax.
 Has a deed of partnership stating the responsibility of each partner
 Involves presence of “silent” or “sleeping” partners, who do not make
decisions, merely giving money to the business and earning profit
 Advantages
 Liability is spread around
 Range of skills
 Higher capital
 Disadvantages

 Slower decision-making

Companies:
 Private limited company (LTD)

 Shareholders are limited to family, friends, business partners
 Shares cannot be sold to the public
 Type of incorporation
 Owner and company are separate entities

 Results in limited liability
 Registered at the Securities and Exchange Commision (SEC)
 Advantages
 Limited liability – when the company is sued or incurs losses, all a
shareholder will lose is his stock in the business.
 Higher capital, higher capacity for expansion
 Disadvantages
 More restrictions
 Corporate taxes (higher)

Difference between partnerships and Sole trader from Companies (Public or Private) is that the owner from the companies is not responsible for the debt

 Public limited company (PLC)

 Company whose shares are listed on a stock exchange and can be
freely bought and sold by anyone
 Required by law to publish their complete and true financial position
 Type of incorporation
 Must conduct shareholders’ meetings
 An LTD can convert to PLC by offering stock market flotation or an initial

public offering (IPO)
 Advantages
 More capital raised from selling stock
 Limited liability
 Continuity after death, freely transferable
 Higher capacity for expansion
 Disadvantages
 Possibility of a hostile take-over through shares, control can change
unexpectedly and be lost by the original owner
 Much more restrictions
 Corporate tax

IPO = When a private company first sells shares of stock to the public,

Question 3

The difference between a for-profit business and a social enterprise is

Answer 3

The biggest difference between a for-profit business and a social enterprise is motivation. The social entrepreneur is motivated by purpose over profit. A social enterprise can still be profitable, but the purpose or positive impact is the primary motivation.

Question 4

The main features of for profit social enterprise

Answer 4

Social enterprises are revenue0generating businesses with social objective at the core of their operations,

Social enterprises can be operated as a non-profit organization or as a for profit company.

Types of for-profit social enterprises:
3 types of main types of for profit social enterprises
Cooperatives, microfinance provide, and public-private partnership (PPP)

Cooperatives are for profit social enterprise owned and run by their members, such as employees or customers, with a common goal of creating value for their members by actions in a socially responsible way.

Mircofinance providers is a type of financial service aimed at entrepeurs of small businesses. As a social enterprise mircofinance provide enable the disadvnatged members of society to gain access to essential financial to help eradicate poverty.

Microfinance is a banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services.

 Cooperatives
 Organizations that are jointly owned and run by its members who share
in profits and benefits
 Advantages
 Shareholders must be help run organization, work is more spread out
 Equal voting rights/power among all shareholders
 Disadvantages
 Decision-making may be more time consuming or involve more
conflicts
 Less profit for each shareholder as it is spread among many
members
 Microfinance providers
 Microfinance – loan service offered to individuals or groups with no
access to more conventional banking services (unemployed, low-income
individuals, etc.)

 Public-Private Partnerships (PPP)
Occurs when the goverment works together with a private sector to provide goods and services

 Advantages
 Incentivized to be more efficient and productive
 Government can focus on other projects and infrastructure
 Enjoy the skills and talents of the private sector (can lead to
increased efficiency and productivity)
 Disadvantages
 Services provided would be more expensive
 Prices goes up, government has to subsidize (increase in taxes)
 Aim of profit may lead to cost cutting, lower quality, higher prices

Question 5

Main feature of non-profit social enterprises

Answer 5

Types of non-profit social enterprises

NPO vs NGOs

NPO, as its name suggests, is a non-profit organisation, that works for any purpose other than making profits but such organizations are incorporated under the Companies Act.

 Non-profit organizations (NPOs) vs. non-government organizations (NGOs)
 NPOs
 Does not divide its funds between owners
 Aim is to raise funds and use it for their beneficiaries
 e.g. service organizations or charities, Bantay Bata, PGH, PCSO

 NGOs (Non goverment organizations)
Is a non profit social etnerpise that existis in the private sector (so no connection tot he goverment
 Exists in the private sector

 A non-profit organization that is exempt from taxes
 Deploys its resources for charitable purposes
 May raise funds to reduce poverty or to reduce environmental problems.
 e.g. Caritas Manila, Pondo ng Pinoy
 Pressure Groups
 Organized groups that do not run for election
 Advocate certain interests such as environment, sexuality, religion, rights,
etc.
 Seeks to manipulate the public or private sector for certain causes.
 e.g. PETA, Greenpeace, Church, LGBT

Question 6

Companies different type of limited liability companies

Answer 6

Private limited company: Company that cannot raise share capital from the general public.
Public limited company has their shares available to the public and must disclose their financias