Types of Business Structures

Sole Trader

• Easy and inexpensive to establish.
• Owner holds all decision-making power.
• Profits are retained by the owner.
• Loan acquisition from banks can be challenging.
• Unlimited liability for the owner.
• Long working hours with limited holidays.
• Full responsibility rests with the owner.
• Operational difficulties in case of the owner's illness.

Partnership

• 2-20 individuals manage the business.
• Workload is shared among partners.
• Partners can specialize in specific areas.
• Additional capital can be invested.
• Unlimited liability for all partners.
• Potential for disagreements among partners.
• Profits are distributed among partners.
• Business operations can be disrupted by a partner leaving.

Social Enterprises

• Distinct from traditional non-profit organizations, as they operate like private sector entities.
• Profits are utilized for the benefit of a specific social, environmental, or cultural cause.
• They attract customers due to their social goals.
• Appeal to high-quality employees aligned with their social mission.
• Increased likelihood of receiving government grants due to their positive societal impact.
• "Asset lock" provision ensures profits and assets from sales are used for the cause in case of closure.

Cooperatives

• Democratic enterprises.
• Prioritize providing quality services to members and customers.
• Customers and employees can become members and share ownership.
• Adhere to international values and principles for ethical conduct.

Charities

• Established to provide assistance to others.
• Rely on donations, sponsorships, and fundraising for financial support.
• May have a "trading arm" (a shop) to generate funds.
• Operated as a trust, not owned by individuals.
• Heavily reliant on volunteers for labor.

Voluntary Organisations

• Focus on providing services to members and the local community.
• Finance is raised primarily through membership subscriptions.

Social Enterprise

• Organizations that aim to generate profits for a particular group or cause.
• Structured similarly to private sector organizations.
• Profits are allocated to a social or environmental/cultural cause.
• Their social goals attract customers.
• Attract high-quality employees who share the organizational social mission.
• More likely to receive government assistance and support.
• "Asset Lock" principle ensures assets and profits are dedicated to the social cause upon closure or sale.

Franchise

• A business agreement that allows the usage of an established business's brand name, products, and services.
• Not a business itself, but a method of running a business.

Franchisee

• Benefits from reduced marketing costs.
• Reduced risk due to the established brand.
• May receive training and administrative support from the franchiser.
• Products, prices, and store layout may be dictated by the franchiser.
• Typically required to pay a royalty based on revenue.
• Initial costs are usually high.

Franchisor

• Benefits from rapid expansion without significant investment.
• Steady cash flow through royalty payments.
• Shared risk between franchiser and franchisee.
• Company reputation can be harmed by poor franchisees.
• May experience difficulties recovering funds from weak franchisees.

Case Study: Subway

• Setting up a fully equipped Subway requires an investment of £100,000 to £150,000.
• Subway grants the right to operate in a specific location and use the brand.
• Franchise fees provide access to national advertising and brand awareness/support.

General Business Disadvantages

• High initial setup costs.
• Lack of control over share purchases.
• Requirement to publish annual financial statements.
• Compliance with company regulations.

General Business Advantages

• Large size facilitates easy borrowing of money.
• Limited liability protection.

Types of Organisations

• Business (Economy) Sectors: Private, Public, and Third sectors.

Private Sector

• Private Aims: Maximizing profits, transforming innovative ideas into successful businesses, and expanding the business for growth.
• Private Sector Examples: Sole Trader, Partnership, Private Limited company, Public Limited company, Multinational company, Franchise.

Public Sector

• Public Aims: Providing high-quality services to all citizens within a country, utilizing taxpayer funds effectively, and delivering essential services.
• Public Sector Examples: Public Sector Organisations (PSO), Local Council (government), Public Corporation.

Third Sector

• Third Sector Aims To support worthy causes, raise awareness of "good causes", and provide the best possible service.
• Third Sector Examples: Charity, Voluntary organisation, Social enterprise, Co-operative.

Private Limited Company (Ltd)

• Shares are privately owned, not publicly available for purchase on the stock market.
• Requires a minimum of one shareholder.

Public Limited Company (PLC)

• Shares are publicly traded on the stock market.
• Requires a minimum of two shareholders.
• Owned by shareholders, controlled by a board of directors.
• Must produce a memorandum and articles of association.

Private Limited Company (Ltd) Advantages

• Control of the company remains with insiders.
• Increased financial resources can be generated from shareholders and lenders.
• Experienced boards of directors assist in decision-making.

Private Limited Company (Ltd) Disadvantages

• Profits are distributed among more individuals.
• Shares are not available for sale to the public.
• The company must adhere to the Companies Act.

Public Limited Company (PLC) Advantages

• Significant capital can be raised by selling shares to the public.
• Limited liability.

Multinational Corporations (MNCs)

• Establish branches or subsidiaries in multiple countries.
• Distinctive feature is the creation of production facilities in various countries.
• Motivations for establishing MNCs:
  • Expanding market share.
  • Seeking lower labor and production costs.
  • Accessing government grants.
  • Minimizing or avoiding taxes.
  • Reducing transportation expenses.
  • Navigating trade barriers.

Public Sector

• Focuses on providing high-quality services accessible to all citizens.
• Utilizes taxpayer funds effectively to deliver essential services.
• Organizational examples: Police, Schools, Hospitals, Fire Brigade, Army, BBC.
• Owned/controlled by local or national government and funded by taxes.

Third Sector

• Aims to support worthy causes, promote awareness of "good causes", and provide the best possible service.
• Provides support for worthy causes like shelter, food, clothing, funding, and awareness campaigns.
• Organizational examples: Charities, Voluntary organizations, Social Enterprises, Co-operatives.

Charities

• Established to assist others.
• Source funding through donations, sponsorships, and fundraising efforts.
• Structured as trusts, not owned by individuals.
• Heavily reliant on volunteers for labor force.