Unit 1: Exploring Business Activity

Business Owners

Introduction:

Business ownership is divided into the 3 following sectors:

– Private Sector– Public Sector– Voluntary Sector

Private Sector:

Sole traders Partnerships Limited Liability Partnerships Public & Private Limited companies Franchises

Public Sector:

Government departments

Government agencies

Worker co-operatives

Voluntary Sector:

Charitable trusts

Sole Traders:

Owned & controlled by one person

Most common type of business

Found in wide range of activities

Sole Traders:

Advantages:

– No complicated set-up process

– Close contact with customers & employees

– All profits retained

– Individual satisfaction

Disadvantages:

– Have to make all decisions

– May work long hours– Issues regarding

holidays/illness– No legal protection– Unlimited debts– Need to provide most of

finance– Need to be jack-of-all-

trades

Partnerships:

Formed by signing Deed of Partnership

Usually found in professional work

Deed of Partnership sets out guidelines re share of profits, responsibilities and payments

Partnerships:

Advantages:

– Share skills & workload

– Easier to raise capital

– Easier to cope with holidays/illness

Disadvantages:– People can fall out– No limited liability– Difficult to borrow

large amounts of capital

– Difficult to make business decisions

– May be disagreements– Profits will be shared

Limited Companies:

Have to be registered Owners are shareholders Shareholders elect Board of directors Shareholders can have a say at AGM Shareholders put funds into limited

company by buying shares

Franchises:

Ready-made business opportunity Established brand and business model Franchisee has to put in money & effort to

reap the rewards Franchisor supplies products, business

systems, etc Franchisee pays fixed sum and regular

payments Franchise is not a form of business ownership

Government Departments:

Department for Customs and Revenue Operates on behalf of government Staffed by civil servants Collect taxes, student loans payments

and make tax credit payments Aim is to be efficient and ensure

fairness

Government Agencies:

More independent than government departments

Set up by government with responsibility for certain activities

Child Protection Agency is one example Funded & accountable to government

but free to manage own affairs Set up within tight guidelines

Local Government:

Local councils responsible for local services

Cover specific areas of the country Give contracts to private companies to

run services, e.g. refuse collection Council oversee efficiency of services Supervise other local amenities and

services

Worker Co-operatives:

A body owned by it’s members Has limited liability Employee must buy a share in the organisation Each member has one vote in making decisions Democratic Members receive share of profits Those who do the work get the rewards Generally small-scale local enterprises

Charitable Trusts:

Raise funds & support good causes Create a surplus to use for helping others Surplus occurs when revenue is greater than

cost of running charity Managed by trustees Trustees experienced in both charity and

business activities Must be registered & produce annual accounts Charities employ paid managers & workers