Business Structure

Which groups are involved in the business activity?

• Owners • Workers• Managers• Consumers• Government• The community as a whole

Work in groups and find out about each group.

• What does each group do?• Why is each group important?

KEY WORDS

• After working in groups try to form sentences looking a the key words.

OWNER

• put money • take a share of the profits • pay for any losses • taking risks

• follow instructions• are employed • have part-time or full-time contracts.• earn money for the work • need training

WORKERS - EMPLOYESS

Managers

• are employed to control the work done by other workers

• give instructions • organise • take decision

• customers

Consumers

Government

• decides on laws

WORKERS - EMPLOYESS

• Workers are employed in the business. They have to follow instructions given to them by the owners or managers. They may have part-time or full-time contracts. These are legal documents which give details of the hours of work and other conditions of employment. Workers earn money for the work they do and this is usually a weekly wage or monthly salary. Often workers need training to do their work well. If there is not enough work for all workers in a business, some may be made redundant (retrenchment), that is, they may be asked to leave the business. This could be of great concern to the workers involved

OWNER

• Owners put money into the business to set it up. Without this capital, no business activity can begin. The owners will take a share of the profits if the business is successful. They may have to pay for any losses made. All owners are taking risks. Putting money into a business will not guarantee success. If the business makes the wrong type of product or does not attract enough consumers, the owners may lose their money. Owners are therefore risk-takers.

Managers

• Managers are employed by the business to control the work done by other workers. They give instructions to other workers, organise the resources of the firm and take important decisions. These decisions might include where to locate the business, what to produce and what price to sell products for. If these decisions are successful, the business does well. If managers make poor decisions, the business could fail. Good and successful managers often earn very large salaries

Consumers

• Consumers are important to every business. They are the customers who buy the product or service that a business makes. Without consumers buying enough products, a business will make losses and eventually fail. Businesses need to find out what products consumers are prepared to buy. This is called market research Consumers must then be attracted to the product by advertising and other forms of promotion.

Government

• The government decides on laws which will affect business activity. The government wants businesses to be successful in its country. Successful businesses will employ more workers and reduce the numbers unemployed. When successful businesses make profits, a tax must be paid to the government. This money can be used to pay for the services which government provides for the benefit of the population.

The whole community

• Business activity affects the whole community. Land and resources are used up during business activity. Sometimes businesses produce goods which can be dangerous and might harm members of the community -such as cigarettes and cars. Factories can produce harmful pollution. Some products are very beneficial to the community, such as medicines or buses for public transport. In addition, business activity provides jobs for workers and managers and incomes are paid to these groups. This raises the community's standard of living. The whole community can therefore be affected by business activity in both positive and negative ways.

Types of businesses

• Large or small businesses• Privately owned or owned by the state.• Owned by one person or by thousand of shareholders.

Business Structure

12/04/12

Owners have to decide on the best legal structure for their business - opting to run as sole traders, partnerships or private limited companies. As the business expands and starts to employ hundreds of staff in many locations, it may decide to become a public limited company or to offer franchises.

Sole tradersA sole trader describes any business that is owned and controlled by one person - although they may employ

workers. Individuals who provide a specialist service like plumbers, hairdressers or photographers are often sole

traders. Sole traders do not have a separate legal existence from the business. In the eyes of the law, the business and the owner are the same. As a result, the owner is personally liable for the firm's debts and may have to pay for losses

made by the business out of their own pocket. This is called unlimited liability.

Sole traderAdvantages

• It is easy to set up as no formal legal paperwork is required.

• Generally, only a small amount of capital needs to be invested, which reduces the initial start-up cost.

• As the only owner, the entrepreneur can make decisions without consulting anyone else.

Disadvantages

• The sole trader has no one to share the responsibility of running the business with. A good hairdresser, for example, may not be very good at handling the accounts.

• Sole traders often work long hours. They may find it difficult to take holidays or time off if they are ill.

• They face unlimited liability if the business fails.