business ownership in the private sector is this man associated with public or private sector?

Business Ownership in the Private Sector

Is this man associated with public or private sector?

Structure - HierarchicalGroup Managing Director

Administration Staff

Maintenance Team

Head of Rides

Robin Hill Park Manager

Head of Catering

Head of Maintenance

Assistant Park Manager

Catering Staff Ride Staff

Human Resource Department (Based at Blackgang)

Is the structure :• tall or flat?• wide or narrow?• Centralised or decentralised?

The Private Sector – Business Ownership

Most businesses in Britain are owned by private individuals. They range from small enterprises like a taxi firm to large organisations such as British Airways. They can be owned in the following ways:

• A sole trader – Generally smallest type of business. Owned by one single owner, but may have several employees. The owner has complete control over every aspect. Examples of sole traders are plumbers, florists, decorators and market traders.

• A partnership is owned by two or more people who are jointly responsible. Examples include architects, doctors and solicitors.

• A private limited company – Name of the company ends in ‘Ltd’. The owner(s) are the shareholders and often also run the business. Many family businesses are private companies.

• A public limited company – generally the largest type of business. The name ends in ‘plc’. The shares are traded on the stock market, meaning the owners are members of the public. The owners (shareholders) do not run the business, instead they will appoint directors who are responsible. Selling shares raises lots of money that the business can use to expand with.

• A franchise – In this case established businesses appoint franchisees to run outlets. The franchisee must be pay to be able to trade under that brand name. Examples include Subway, McDonald’s, The Body Shop.

The Private Sector – Business Ownership

Businesses with Unlimited Liability

Unlimited companies include: Sole Traders and Partnerships.

• Unlimited liability means that the finances of the business are treated as inseparable from the finances of the business owner.

• If the business owes £1,000,000, the owner owes £1,000,000 and can be forced by court to pay for it themselves. This means selling their own private houses and cars etc.

Businesses with limited liability

Limited companies include: Private Limited companies and Public limited companies.

• Limited liability means that the legal duty to pay debts run up by the business stay with the business.

• The debt is not the owners personally.• If the company owes £1,000,000 that the company

cannot pay. The courts can order the business to sell all of its assets and if that is not enough the business will then be closed.

• The owner will have no personal liability for those debts.

Your Task – Advantages and disadvantages of the different types of business ownership

For all 5 types of ownership complete 2 tasks:Task 1 – Create a table of advantages and disadvantages of that form of business.Task 2 – Find an example business of that form.Task 3 – Why is that Business a sole trader (or whatever form of ownership they may be)?See sole trader example below.

Advantages Disadvantages

Owner is in complete control and makes all decisions

Unlimited Liability

No arguments Hard to access finance

Clear objectives Only one person’s ideas

Can quickly make decisions Long hours

Cheap to setup Hard to go on holiday

Be your own boss No sick pay

Set your own hours Stress is all on one person

Example - OwnershipVectis Ventures Ltd – Private Limited Company

Features of Ltd’s:• Owned by 1-50 shareholders (family in this case)• Documentation required for registering a limited company:• Memorandum of Association

- Details of the nature, purpose and structure of the company• Articles of Association

- Details of the internal rules of the company Shareholders have limited liability – can only lose what they agreed to put into the

company – no personal liability• shares only bought and sold with agreement of existing shareholders

• Must publish accounts (annual report)

Exam questions

Green: 1a, b, f (use Vectis Ventures Ltd),

Blue: 1a

Pink: 1c