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?