Business structures

Question 1

what is a public sector?

Answer 1

-the public sector is that sector of the economy that is owned and controlled by the government rather than individuals
-main aim is to provide a good quality service that is accessible to everyone
E.G. police, school, hospitals

Question 2

what is a private sector?

Answer 2

-the private sector is owned and controlled by individuals or groups of individuals rather then the government.
-main aim is to survive and make profit

E.G. ASDA, apple

Question 3

why do some industries exist in both private and public sectors?

Answer 3

people are willing to pay to get better services and some willing to wait

Question 4

what are public goods?

Answer 4

goods where consumption by one person does not reduce the amount available to others and, once provided, all individuals will benefit

Question 5

what are the 2 features of public goods?

Answer 5

-non-excludability
-non-rivalry

Question 6

what is non-excludability?

Answer 6

individuals cannot be prevented from enjoying the benefits provided by public goods

Question 7

what is non-rivalry?

Answer 7

one person gaining from consumption of a good or services will not prevent others from gaining the goods or services.

Question 8

what is a merit good?

Answer 8

a merit good is one that is deemed to be beneficial for society but is under provided by the merit

E.G. education, health care

Question 9

what are the aims of the public sector?

Answer 9

• make essential services available to all for the goods of society
  -services that would not be provided by the private sector
  -services that can not be easily charged for or sold profitably but benefit everyone

Question 10

what are the aims of the private sector?

Answer 10

-survival:
=to continue to exist as a business
=this may be the primary objective of a start-up business
-profit:
=to achieve sales revenue that is higher that the total costs
=profit=sr-tc
-growth:
=to increase in size either by value of sales or volume of sales
=this may be organically i.e opening new stores

Question 11

what benefits does the private sector bring to the economy and society?

Answer 11

-better and faster quality services
-creates jobs
-paying taxes
-tailored
-increase GBP

Question 12

what is the importance of the private sector?

Answer 12

-profit incentive help drive down prices
-creates jobs
-social enterprise and charities

Question 13

what is a sole trader?

Answer 13

an individual who owns and runs their business. they may employ workers

Question 14

what is unlimited liability?

Answer 14

the business is liable for all the debts of the business, up to and including the values of all assets held

Question 15

what does a sole trader having unlimited liability mean?

Answer 15

-they do not have a separate legal existence from their owner
-meanings owners are personally responsible for all the debts and may sell personal professions to pay back

Question 16

what are the benefits of a sole trader?

Answer 16

-less paper work
-more earning potential
-low over heads

Question 17

what are the disadvantages of a sole trader?

Answer 17

unlimited liability
-less customer trust
-higher taxes

Question 18

what is a partnership?

Answer 18

a partnership involves the joint ownership of a business where 2 to 20 people share the costs, risks and responsibilities of being in business together

Question 19

what is the deed of partnership?

Answer 19

it is a legal document that sets out the rules under which the partnership will operate

Question 20

what does the deed of partnership cover?

Answer 20

-sets out the share of profits
=determines how much money the partners will get

-partnerships role in the business
=ensuring the business has an organisational framework

-what will happen if one of the partners were to pass away
=shows where the business will go after partner leaves or passes

-voting shares of each partner
=the number of voting share is often allocated in relation to the relative size of the investment made by each partner

Question 21

what are the benefits of a partnership?

Answer 21

-liability split between partners
-cover for someone if ill
-more investments

Question 22

what are the drawbacks of a partnership?

Answer 22

-sharing profits
-unlimited liability
-disagreements
-responsible for other owners mistakes

Question 23

what is limited liability?

Answer 23

the owners are not responsible for the company’s debt, they can only lose the money that they have invested in the business in form of shares

Question 24

what is needed to set up a limited company?

Answer 24

-companies must be registered at companies houses
-companies must send the following:
=memorandum of association
=articles of association

Question 25

what is a memorandum of association?

Answer 25

basic details about company E.G name, address, nature of company

Question 26

what is a article of association?

Answer 26

rules of the company E.G. procedures that must be followed, duties of directors, voting rights

Question 27

what is a private limited company (ltd)?

Answer 27

type of organisation you can set up to run your business

Question 28

what are key points about ltd?

Answer 28

-companies have ltd after their name -owned by shareholders -can only sell shares onto other shareholders

Question 29

what are the advantages of an ltd?

Answer 29

-limited liability -other businesses and lenders are more likely to trade and invest -more capital can be gained

Question 30

what are the disadvantages of an ltd?

Answer 30

-legal procedures in setting up -profits have to be shared with shareholders -shares cannot be sold to public

Question 31

what is a public limited company (plc)?

Answer 31

a business that is managed by directors and owned by shareholders.

Question 32

what are the key points about plc?

Answer 32

-have plc after the name -shares can be sold to public -open to more public scrutiny

Question 33

what are the advantages of a plc?

Answer 33

-limited liability -more funds can be raised through -selling shares to the public

Question 34

what are the disadvantages of a plc?

Answer 34

-loss of control -lack of privacy -more complex to set up

Question 35

what are examples of not for profit organisation?

Answer 35

-charities -co-operatives -social enterprises

Question 36

what is a not for profit organisation?

Answer 36

businesses that are made not to maximise profits instead their focus is on social or ethical objectives

Question 37

what is social enterprises?

Answer 37

a business with a social or environmental purpose who reinvests at least 50% of the profits they make to help achieve their objectives and create a social/environmental change

Question 38

what is a co-operative?

Answer 38

-organisations that operate for the wellbeing of their members -members can be customer, employers, suppliers

Question 39

what are the benefits of a co-operative business model?

Answer 39

-controlled by and owned by people who works in it -employers have no responsibility -equal vote

Question 40

what are the drawbacks of a co-operative business model?

Answer 40

-managers don't get paid well -requires continuous cooperative education programs for members -could lead to disagreements

Question 41

what are charities?

Answer 41

organisations with an aim to support a specific cause or benefit for the well being of society