Economics and Philosophy

Sole traders and partnerships.

A sole trader or sole owner is a business that is owned and run by one person. The main reason to be a sole trader is often independence. The main aim is profit. The owner raises the finances himself from personal sources or by borrowing.

Advantages:
• Your are your own boss
• Independence
• Better motivation
• Easy and cheap to start up

Disadvantages:
• Big risk and responsibility
• Difficult to make decisions
• Hard to extend

Closing a business
If she or he is unable to pay debts, the creditor can apply to a court to have the owner declared bankrupt.

Partnerships.

A partnership is a business that is owned by two or more people. So business can use more that one person’s experience. The owners have equal joint control of the business and receive any profit equally. Responsibility is shared among the partners.

Advantages:
• Easy to set up
• Partnership can be formalized by written an agreement known as the Deed of

Disadvantages:
• The decisions of one partner is binding on the others
• Have unlimited liability
• Business has no separate existence

Closing the business.
If any partner leaves, the business ceases to exist and must be re-formed. Partners can be also forced out of business.

Liability- is the responsibility of the owner for the debts of the business.
Activity: list advantages and disadvantages of sole trader and partnership.

Limited Liability Companies
• “Limited”-refers to the way in which the responsibility for debt is limited ti the amount that person initially put into a business.
• “Liability” refers to responsibility for the debts of a business.
• “Company” refers to the legal status of a business. It means that the business has been registered with companies House and is now separated.

Setting up
There must be a minimum two shareholders to register a business a company. Documents needed Memorandum of Association, Articles of Association, Certificate of Incorporation and a company number.

Advantages:
Business become companies to gain limited liability for their owners. This may help to raise capital.

Disadvantages:
It is more complicated to start up a company. The company’s account and finances are open to the public. Conflicts between shareholders.

Going public:
1. Private limited Company have LTD after their names
2. Public Limited Company have PLC after their name. They can sell shares to the publicThis is called floating a company. In the UK you must to have at least 50,000 pounds. And publish a company reports.

Franchises

Franchises occurs when a successful business decides to expand by selling the rights to use their ideas. A franchise is a way of starting, owning and operating a business without a high risk.

The franchise process
• The franchise is permission to sell the product or brand, or to use the successful format.
• The franchisee buys into the success of the established business. It buys the use of its name, brand, advertising, reputation and support.
• The franchiser is the seller

Advantages:
Franchises buy into a established business and may receive help with products, staff, training and sales materials. They may gain a territory without competitors

Disadvantages:
Franchisers charge a fee for the franchise. Franchiser can be quite restrictive.
Multinationals and holding companies

A multinational is a business that has operations in many countries around the world. It also tends to have a global brand.
• Holding company- a company that holds all most of the shares in other companies.
• Operating company- a company that produces and trades
• Parent company- another name for the top company in a group.
• Subsidiaries- businesses that are owned by holding companies
• Transnational- another word for multinational

Multinationals benefit from their size. They can buy a bulk. They can also locate operations to keep costs and taxation down.

Public sector businesses.

A public sector is the one that owned by the government.
There are some reasons to creating a public sector businesses such as:
• National security. Some services could be dangerous if in private hands. Such as army.
• Politics. Sometimes there are political reasons for keeping a particular businesses out of private hands.
• Social.
• Charging.
• Economics
• Monopolies

Who pays for public industry?
The public sector is funded from taxation in three main ways:
• General taxation
• Local taxation
• National Insurance contributions

Examples:
The health service, the civil service, social services, education etc.
Cooperatives, charities and voluntary groups.
Cooperative and mutual societies want to make sure that their members all get a fair
deals.

Charities want to maximize the amount of good that they can do.
Voluntary groups usually provide a service to the community.
Charity- a business that tries to do the most good for its chosen cause.
Cooperative- a group that shares in a business to ensure a fair deal for its members.

I gave it to Rebecca=)