There are three main types of business organization: private, voluntary, and state. Private businesses range in size from large corporations to small shops. They are the main drivers of economic change and job creation. Sole proprietorships are the most common form of private business, with one owner making quick decisions but taking on unlimited liability. Partnerships allow for shared skills and 24/7 operations but also slower decision-making and potential disputes between partners. Companies are owned by shareholders and have separate legal status, allowing for large capital investments but greater complexity.

1. Types of business organisation Organisations fall into 3 different categories: Private Voluntary State

2. Private Sector Private sector plays an important role creates goods and services employs millions of people varies in size from Shell and ICI to corner shops driving force for change and improvement

3. Sole Trader Most common form of business ownership: no complicated legal requirements decisions can be made quickly close contact with customers and employees all profits retained/high satisfaction

4. Sole Trader Some disadvantages: all decisions are made by owner long hours unlimited liability sourcing finance

5. Partnership 2-20 people in a partnership partners can share skills/knowledge organisation could provide 24/7 service easier to raise finance

6. Partnership Some disadvantages disputes unlimited liability (except sleeping partner) difficult to raise large amount of capital decision making process is slower

7. Partnership Deed Legally binding agreement covers share of profits, salary, drawings, duties and responsibilities, cessation of partnership, death of partner.

8. Ownership – Question…… Explain the advantages and disadvantages of being a sole trader. (6) Distinguish between operating as a sole trader and a partnership. (4) INTERNET RESEARCH – PARTNERSHIPS – WHAT IS A LIMITED PARNTERSHIP WHAT HAPPENS WHEN A PARTNER DIES FIND THE BEST RATE OF INTEREST FOR NEW BUSINESS START-UPS

9. Solution – Distinguish between operating as a sole trader and a partnership. A sole trader is run by one person whereas a partnership is run by 2 – 20. A sole trader is able to make quick decisions whereas in a partnership decision making is slower as all partners are consulted. A partnership can raise more capital than a sole trader as all the partners introduce capital. A sole trader may work longer hours whereas in a partnership the workload is shared. It may be possible to trade 24/7 whereas this would be impossible in a sole trader.

10. The Company owned by shareholders - shareholders unlikely to run the company a separate legal body shareholders have limited liability company has to be registered with Companies House Articles of Association and Memorandum of Association must be provided

11. The capital of a company authorised share capital - £200,000 issued share capital - £80,000 paid-up share capital -£40,000

12. Private company (Ltd) Usually small shareholders 2+ shares not traded on Stock Exchange Shareholders are “invited” - may be family or friends may find it easier to raise finance that unlimited liability organisations

13. Public company (plc) shares bought and sold in stock exchange large amounts of capital can be raised quickly costly to have shares quoted on SE may not raise all capital required if SE has a bad day original shareholders can lose control

14. Private Sector Questions Read pages 37 – 42 then complete the following questions in your jotter: Question 1 (page 38) Question 2 (page 39) Summary questions (page 45) “Orange” case study (page 46)

15. Franchises Growth area - increasingly popular form of ownership Hiring out of a good idea A franchise grants permission to sell a product and trade under a certain name within a defined area

16. FRANCHISE a business arrangement where one firm pays for the right to trade under the name of another FRANCHISER - the business which sells the right to trade using its name to others, eg, McDonald’s, Hertz FRANCHISEE - the person who buys the right to trade using the name of the mother company

17. franchise Franchiser sells the idea Franchisee pays for the franchise Capital has to be found by franchisee Materials/supplies must be bought from franchiser Percentage of profit/turnover returned to franchiser Franchisee has a local monopoly and is trading under a well-known name

18. Why buy a franchise? existing, established product therefore more chance of success cheaper market research and promotional costs may receive help and training from franchiser lower start up costs

19. Why sell a franchise? quicker growth - can cover wider geographical area more quickly without having to buy premises or pay staff provides funds - franchisee must buy franchise and pay part of its profits to franchisor

20. DISADVANTAGES reputation of the company/brand depends upon how good the franchisees are franchisees are bound by contract which restricts what they do part of profits/turnover must be paid to franchiser

21. Why so popular? 96% of franchises are still in profit after 5 years.(Only 66% of small firms survive the first 3 years) There are some 718 business format franchises in the UK comprising over 35,000 franchisees ­ all with a variety of former careers. Average investment of £42,700 We all know that McDonalds and Thornton's Confectionary are franchised, but there are many others.

22. Franchising - Question Explain the costs and benefits of franchising for: the franchisor The franchisee (8) To answer you must ID the cost or benefit then explain why it is a cost or a benefit.

23. Franchising - Question Explain the costs and benefits of franchising for: the franchisor The franchisee (8) To answer you must ID the cost or benefit then explain why it is a cost or a cost or benefit. Answer: A benefit of franchising for the franchiser is the potential to expand quickly . They can expand quickly because the franchiser can sell licences over a wide geographical area without having to manage the individual branches. (1 mark) A cost to the franchiser is the reputation of the company is outwith their control . This is because the success of the business is dependent on the skills and expertise of individual franchisees (1 marks)