why start a business?
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Why start a business?. How do you identify an opportunity?. Business Activity. Private Sector: Business activity owned financed and controlled by private individuals Sole Traders Partnerships Private Limited Companies Public Limited Companies (PLCs) Co-operatives Franchises Charities. - PowerPoint PPT PresentationTRANSCRIPT
Why start a business?
How do you identify an opportunity?
Business Activity• Private Sector: Business activity owned financed and
controlled by private individuals– Sole Traders– Partnerships– Private Limited Companies– Public Limited Companies (PLCs)– Co-operatives– Franchises– Charities
Objectives of Private Sector Business
Objectives
ProfitSurvival
Share Price
Market PowerSales and Sales
RevenueEfficiency
Quality and Innovation
Image and Reputation
EnvironmentSatisficing
Social Issues
Business Activity
• Public Sector: Business Activity owned, financed and controlled by the state through government or local authorities– Government – key departments set policy and monitor
implementation– Local Authorities – County Councils,
District Councils, Parish Councils– Health Trusts– Public Corporations – BBC
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.
Range of Business Offered by the Public Sector
Roads
Allotments Paths and Parks
Schools
Street Lighting
Waste Disposal
Trading Standards
CemeteriesEnvironmental Health
Museums and Arts
Economic Development and Tourism
Planning
Licensing Care of the Elderly
Social Services
Business Ownership
Business Ownership can be categorised by the following:
• Businesses with unlimited liability• Businesses with limited liability• Other forms of business organisation
Businesses with Unlimited Liability
• Unlimited liability means that the finances of the business are treated as inseparable from the finances of the business owner.
• If the business owes £1,000,000, the owner owes £1,000,000 and can be forced by court to pay for it themselves. This means selling their own private houses and cars etc.
• There are two types: Sole Trader, Partnership.
Sole Trader• An individual who owns and operates their own business.• There may be employees but there is only one owner who
benefits financially from the business.• Despite the financial dangers involved, sole traders are the
most common form of ownership adopted by UK businesses.
• Builders, plumbers and many independent shopkeepers will be sole traders.
• Disadvantages include little finance available, long hours of work (including difficulty of taking a holiday), difficulties of running a business with ill health.
Partnerships
• Similar to sole trader but with more owners. Between 2 and about 52
• There are advantages and disadvantages of a partnership owned business. Draw up a table of list what you think they are
Advantages of partnership Disadvantages of partnership
Businesses with limited liability
• Limited liability means that the legal duty to pay debts run up by the business stay with the business.
• The debt is not the owners personally.• If the company owes £1,000,000 that the company
cannot pay. The courts can order the business to sell all of its assets and if that is not enough the business will then be closed.
• The owner will have no personal liability for those debts.
Businesses with limited liability
• Limited liability companies have to go through a legal process to become a company – process of ‘incorporation’.
• 2 types of limited company: Private limited and Public limited.Advantages DisadvantagesConfidence to expand due to limited liability
Must publicise financial information
Can borrow more money Many more costs associated with the rules of being a limited company e.g. Annual reports
Private Limited Companies
• Still relatively small companies.• Owned by shareholders but the shares are not
listed on the stock market.• Shares are sold with the permission of the
directors.• ‘Ltd’ appears after the company’s name.
Public Limited Companies
• When a private limited company expands past a share capital of £50,000 it can convert to a ‘Plc’.
• This means the company will be ‘floated’ on the stock market, which allows any member of the general public to buy shares.
• This gives the company access to much more money to then further invest in the company.
Other forms of Business Organisation
• Co-operatives – These can be owned by the staff of the business e.g. John Lewis/ Waitrose
• Not-for-profit Organisation – These include charities
• Franchises – A business that has bought the right to trade under an established name. For example Subway in Ryde is a Franchise. It is owned by a man from the Isle of Wight who pays to use Subway’s brand.
Type of business
Number
Ex Source of Finance
Liability for Debts
Profit Distribution
Authority and control
Sole Trader
1 Plumber SelfBank
Unlimited To Owner
Owner
Partnership 2-20 Solicitor PartnerBank
Unlimited Partners Partners
Ltd 2+ Local Brewery
Above +Shares
Limited Shareholders
Shareholders
Plc 2+ Sainsburies
AboveStock Ex
Limited Shareholders
Board of directors
Task – Complete table and questions from handout p14/15.
• Read the case study regarding Arcadia Group Limited.
• The situation regarding Philip Green’s ownership of the organisation will give you a clearer understanding that business ownership isn’t as simple as the previous slides suggest.
For next week:
• I want you to go to a business and ask them (probably best if the owner) what type of ownership they are?
• Why are they that type?• Do they consider changing?• Discussion at start of next lesson regarding
who you spoke to and what you found out. • More information the better!
1. 4 marks1 for saying the type of ownership affects legal status1 for mentioning limited and unlimited liability2 for explaining what each means
2. 8 marks4 marks for identifying advantage and disadvantage1 mark for each explained
3. 8 marks4 marks for identifying economies of scale / diversification / synergies / branding as benefits to his business.4 marks for explaining how they make the business successful.Also answer the question directly with which of the 4 are the most important.
4. 12 marksDiscuss other competitionBrand cannibalism?Do Arcadia hit different market segments?Why would customers benefit from Arcadia owning many of the high street shops?Do customers have less choice because of Arcadia?