Slide_4-1.ppt

S9 IGCSE®/O Level Economics 4.1 Types of business organization  Starting a business An entrepreneur combines and organizes resources in a firm for the purpose of carrying out productive activity or business. Firms are therefore also known as business organization...

S9 IGCSE®/O Level Economics 4.1 Types of business organization  Starting a business An entrepreneur combines and organizes resources in a firm for the purpose of carrying out productive activity or business. Firms are therefore also known as business organizations. A firm may take a number of legal forms depending on how it is owned, controlled and financed. Do I have enough capital (or money) to Am I willing to share ownership and set up in business? profits? Yes? Form a No? Yes? partnership or limited Sole trader No? Sole trader company Form a partnership or limited company Can I manage my business alone? Am I willing to risk everything I own? Yes? No? No? Form a partnership or Yes? Sole trader Form a partnership or limited company Sole trader limited company Financial liability in business Owning a business involves financial risk Unlimited liability (not a company) The financial obligation of business owners in the event of business failure is to repay all business debts (even if it means selling off their personal possessions) Limited liability (a company) The financial obligation of business owners for business debts is no more than the amount of capital they invested in the enterprise This is because business owners with limited liability have a separate legal identity from their business  Sole trader A sole trader or sole proprietorship is a business owned and controlled by one person It is the oldest and most popular form of business organization 5  Partnership A partnership is a legal agreement between two or more people to own, finance and run a business It is popular among professionals such as solicitors, accountants, veterinary surgeons 7  Joint-stock company These companies sell shares in their ownership to raise permanent (i.e. non-repayable) capital Shareholders are the owners of joint-stock companies Shareholders elect directors to run their company from day to day These firms are also known as corporations or limited companies because shareholders have limited liability A joint-stock company has a separate legal identity from its owners (it is taxed separately; it can own assets and borrow money in its own right; it can be held legally Private limited company 10 Public limited company 12  Multinational A multinational is a firm that operates in more than one country but will usually have its headquarters based in its country of origin Multinationals are some of the largest companies in the world, selling many billions of dollars worth of goods and services, and employing many thousands of people globally Total revenue $458.4 billion Total revenue $405.6 billion Total employees 102,000 Total employees 2,100,000  Multinational  It has a huge global customer base and revenue potential  It can minimize transport costs locating plants across different countries to be near raw materials or large consumer markets  It can minimize wage costs by locating operations in low- wage economies  It has low average production costs from large-scale production  It can raise significant capital for business expansion, R&D and to employ highly skilled labour Implications for host economies and governments Cooperatives – using the link on Google Classroom answer the following: 1. What is a cooperative? 2. Write down 3 cooperative principles. 3. Write down 3 cooperative values. 4. Why is a coop different from other types of business? 5. Research a coop from anywhere in the world and find out at least five facts about it. What is a co-op | Co-operatives UK 16 Cooperative A cooperative is owned by its members for mutual benefit There is a one member, one vote policy  Public corporation This is a business-like public sector organization created to carry out a particular public sector function or to operate under governmental control Examples are, a municipal water company, a public health service or a central bank Some may be run for profit They are responsible for day-to-day running of nationalized industries 19 Public corporation