1. UNIT 1 1.1 - What do businesses do?
Business Management
UNIT 1
1.1 - What do businesses do?

2. Types of business organisation

3. Sole Trader FEATURES OF SOLE TRADER Aims is to make a profit
Business owned and often run by one person
May employ other people in the business
Tend to be small businesses
Examples: Small shops, Car mechanics, Flower shop
Can you name 3 sole trader businesses in Oban?
Albany Stores, Esplanade Post Office, Flower basket.

4. Sole Trader ADVANTAGES: DISADVANTAGES: Owner keeps all the profits
Owner controls all the decisions
Easy to set up the business.
DISADVANTAGES:
Owner bears all the responsibilities
If owner cannot work the business may suffer – lack of cash
Owner may have difficulty obtaining finance
Owner has unlimited liability.

5. Partnership FEATURES OF PARTNERSHIP Aim is to make a profit
Business between two and twenty partners
Partners usually enter into a legal agreement called a Partnership Agreement which states
States share of profit
Which partner has most responsibility
Partners may invest different amounts of money
This will affect their share of profit
Examples: Dentists, vets and lawyers.
Can you name 3 partnership businesses in Oban?
Munros Garage, MacCamley and Laird, Stevenson Kennedy (lawyers)

6. Partnership ADVANTAGES:
Partners can share workload according to skills
Partnerships find it easier to raise finance than sole trader
Risks are shared between partners – risk of poor profit
DISADVANTAGES:
Profits shared between the partners – therefore smaller share
More people to run business – risks of disagreement
Partners usually has unlimited liability
Legal agreement needs to be set up.

7. What are Shares? Companies are owned by people who are shareholders
Anyone over 18 can buy shares
Shareholders are given a share of any company profits
The share of profits is called a dividend as is payable once or twice yearly

8. Private Limited Company
FEATURES OF PRIVATE LIMITED COMPANY
Aim is to make a profit
Name of the business will end with Ltd
Owned by shareholders – minimum of one
Shares in the company are owned privately
Run by a Board of Directors
Such companies are often family businesses.
Examples: MacQueen Bros had recently become a Private Ltd Company
Can you name 3 private limited companies in Oban?
Direct Footwear Services Ltd, MacQueen Ltd, Beaver Timber Ltd,

9. Private Limited Company
ADVANTAGES:
Owner keeps control of the business
Private limited company can raise more finance that a smaller business
Shareholders have limited liability.
DISADVANTAGES
Profits shared between more people
A legal agreement must be set up
Shares cannot be sold to the public, so raising finance can be more difficult than for a public limited company.

10. Public Limited Company (plc)
FEATURES OF A PUBLIC LIMITED COMPANY
Aim is to make a profit
Name of the business will end with plc
Owned by shareholders – minimum of two
Minimum share capital of £50,000
Shares in the company can be bought and sold on the Stock Exchange
Run by a Board of Directors
Examples: BP plc, Boots plc, Tesco plc.
Can you name 3 public limited companies operating in Oban?
Tesco plc, Boots plc, W H Smith plc

11. Public Limited Company (plc)
ADVANTAGES:
Public limited company can raise more finance that
PLC can borrow more money
Shareholders have limited liability.
DISADVANTAGES:
PLC has no control over who buys its shares
Profits shared between many more people
Expensive to set up
Accounts must be published annually.

12. Limited and Unlimited Liability
Sole trader or unlimited partners have full responsible for the debts of the business.
If the business does not have enough money to pay its debts the owners or partners must pay the debts from their own personal funds.
May result in the owners having to sell their own possessions to raise the money.
Limited Liability
In a Private or Public Limited company the shareholders liability is limited to the amount they have invested, or agreed to invest in the company.
The will not have to sell their own possessions to pay the debts of the business.

13. Limited Partner A limited partner is someone who:
Invests money in the partnership
Takes no part in the running of the business
Gets a share of any profits
Has limited liability – if the business fails they will only loose the money they have invested in the business and nothing else.

14. Can you name 2 franchises in Oban?
What is a Franchise?
A franchise is an agreement or license between two parties which gives a person or group of people the rights to market a product or service using the trademark of another business.
Examples of a Franchise are:
McDonalds
Domino Pizza
Body Shop
Can you name 2 franchises in Oban?
Subway, BSM

15. Franchise There are 2 parties to a franchise agreement:
Franchisor – the person owning the rights to the product or service being offered
Franchisee – person or group of people purchasing the rights to sell the product or operate the service.

16. Features of a Franchise
The Franchisee pays to copy the business idea, image, name of an existing company
A MacDonald’s burger in Fort William will be look and taste exactly the same as one bought in Glasgow
The franchisee pays a licence and shares profits with the franchisor
Franchisee is restricted on what they can charge for the goods and what they can sell.

17. Advantages of a Franchise
Reduces the risk of business failure
The business has been tested and proven on the market
Allows small businessman to compete with larger business concerns
Economies of scale
Support offered by franchisor – advertising etc
Trade under a recognised brand. Training provided by franchisor
No previous experience required
Exclusive territorial rights
Back-up provided for administration and trouble shooting.

18. Disadvantages of a Franchise
Franchisee may suffer from bad service provided by another of the franchisees in a different area
Highly specialised business and limited to what the franchisor wants to do – no room to expand products
If the franchisee wishes to sell their business they must gain consent of franchisor
Franchisee may not like the interference.

19. Can you give an example of a Public Ownership organisation in in Oban?
FEATURES OF A PUBLICLY OWNED ORGANISATION
Main aim is to provide a service
Funded by taxpayers
Controlled by government
Provide essential services for the whole population
Non profit making
Examples: BBC , National Health Service, Education Services
Can you give an example of a Public Ownership organisation in in Oban?
Local Government,

20. Public Ownership ADVANTAGES: Less competition DISADVANTAGES
May not be as profitable as private sector businesses.