Business Concepts and Forms

Business Concepts

• Customer Need: The problem a product or service solves for a customer.
• Customer Group: The specific type of customer the business targets.
• Product Idea: The solution to the customer need.
• Resources: The inputs (human capital, natural resources, real capital, economic capital, entrepreneurs) needed to create and deliver the product or service.
• Factors of Production: Inputs comprising human capital (people's abilities), natural resources (raw materials), real capital (created assets), economic capital (money), and enterprises (entrepreneurs).
• Scarcity: When demand for a resource outstrips its supply (e.g., fossil fuels).
• External Business Idea: Focuses on market presentation, needs addressed, and target customer group. Success hinges on product demand by that group. Efficiency and low cost production are key to success.

Forms of Business

• Manufacturing Companies: Process raw materials to create goods.
• Service Companies: Sell services.
• Trading Companies: Sell other companies' goods.

Legal Forms of Enterprise

• Sole Trader: One owner with unlimited liability. No minimum capital.
• Partnership: Two or more owners with unlimited and joint liability. No minimum capital.
• Limited Liability Partnership (LLP): Limited liability for partners; general partners retain unlimited liability. No minimum capital.
• Limited Company (Public): Shares sold publicly; limited liability for shareholders; minimum 500,000 SEK capital.
• Limited Company (Private): Shares not publicly traded; limited liability for shareholders; minimum 25,000 SEK capital.
• Co-operative/Economic Association: Owned collectively; limited liability for members. Capital requirements depend on structure.
• Franchise: Franchisee owns individual location; profit shared with franchisor. Capital defined by franchisor.

Legal Forms: Liability and Ownership

• Sole Trader: Unlimited liability; sole owner; owner receives all profits; not a legal person.
• Partnership: Unlimited and joint liability; shared ownership and profit amongst partners; not a legal person.
• LLP: Limited liability for limited partners, unlimited for general partners; shared ownership and profit amongst partners; not a legal person.
• Limited Company (Public & Private): Limited liability for shareholders; publicly or privately owned; profits distributed as dividends to shareholders; legal person.
• Co-operative: Limited liability for members; owned collectively; profits shared based on contribution; not a legal person.
• Franchise: Depends on agreement; franchisee owns individual location; profits shared with franchisor; not a legal person.

Legal Forms: Advantages and Disadvantages

• Sole Trader: Advantages: Simple, full control, keeps all profits, low start-up cost. Disadvantages: Unlimited liability, limited capital raising, taxed as personal income.
• Partnership: Advantages: Relatively easy to form, shared responsibility, shared decision-making, no minimum capital. Disadvantages: Unlimited and joint liability, potential conflict, difficult exit.
• LLP: Advantages: Limited liability for limited partners, no minimum capital, flexibility. Disadvantages: General partner has unlimited liability, more complex structure.
• Limited Company (Public): Advantages: Limited liability, ability to raise capital, perpetual existence. Disadvantages: High start-up cost, complex to manage, stricter regulations, double taxation.
• Limited Company (Private): Advantages: Limited liability, easier capital raising than sole traders/partnerships, separate legal entity. Disadvantages: Minimum start-up capital, more administration, complex to operate.
• Co-operative: Advantages: Mutual benefits, democratic control, shared resources and profits, encourages sustainability. Disadvantages: Complex to establish and administer, shared control may complicate decision-making.