Business Organisations Firms or Enterprises Companies Public Limited Companies

An exploration of the different types of Business Sides 2 & 5 are portions of the schematic diagram given to you in class. Slide 2 Public / Private division Slide 5 Unincorporated / Incorporated Slides 3 & 4 are concerned with the PUBLIC sector and the rest with the PRIVATE sector

Types of Business Organisations   PRIVATEY OWNED STATE OWNED THE PRIVATE SECTOR PUBLIC

THE PUBLIC SECTOR Owned by the people of the country and run by the government or business people on their behalf National Government Departments Local Government QUANGO's

Goods or Services provided Public Goods which wouldn’t be provided efficiently or in sufficient numbers by the private sector Free riders / Economies of Scale Merit Goods products that ‘society’ thinks are good for everyone to have regards of their wealth

Objectives of Public Sector Activity Access – available to all regardless of location or income Quality – high quality services that do not cut corners Affordability – services offered at prices that are cheaper than private sector or free at the point of use Equity – available to anyone whatever their background, status, income, class, race, religion, etc.

THE PRIVATE SECTOR INCORPORATED BUSINESSES COMPANIES SOLE TRADER   UNINCORPORATED INCORPORATED BUSINESSES COMPANIES SOLE TRADER PARTNERSHIP PRIVATE LIMITED PUBLIC LIMITED COMPANY( Ltd) COMPANY ( PLC)

Objectives of Private Sector Business Profit Survival Environment Image and Reputation Share Price Objectives Social Issues Quality and Innovation Market Power Efficiency Sales and Sales Revenue

Investing in a Business Sole traders must raise all the finance to set up and run the business themselves Partners can all contribute to the financing of a firm Both the above are unincorporated. The owner and the business are the same;- There is no separation of ownership and control Private limited companies can sell shares to family, friends and associates Public limited companies can raise finance by selling shares on the stock market

Limited Liability – What does it mean It all comes down to the responsibility for the debts of the business: A sole trader or partnership can be held responsible for all the debts of the firm The owners of limited companies can only be held responsible up to the value of their investment in the business

Ownership and Control Owners often want to keep control of their businesses This leads many small firms to stay as sole traders, even though this limits their funds Taking on new partners or shareholders cuts the amount of control that owners have If you hold the majority of shares (over 50%) you can keep some control, but not all

Legal Responsibility Sole traders have no legal formalities to go through, apart from registering for VAT if their turnover reaches a certain amount Partnerships also have no legal formalities but may choose to sign a Deed of Partnership Firms have to go through a series of legal formalities to incorporate and so become a company

Profits and Losses Any profits made (once tax has been paid) can be kept by the owners of the business This makes Sole Trader (and partnership) businesses very attractive Dividends are paid to the owners BUT Ploughed back profits are an excellent source of capital for investment in future expansion But whatever funds have been put into the business will be lost if it goes bust!

Becoming a company Limited companies must produce two documents Memorandum of Association and Articles of Association If these are acceptable, the Registrar of Companies awards a Certificate of Incorporation The company can then all itself a company If it wants to sell its shares on the stock market it must also be investigated by them

Other Legal Requirements (UK) A limited company must also send a copy of its annual accounts to the Registrar It must also hold an Annual General Meeting and invite its shareholders to attend Becoming a Public Limited Company involves far more time and cost It must have a minimum of £50,000 share capital