1.4:  Types of Business Organizations Notes:

PRIVATE SECTOR - BUSINESS ORGANIZATION:

SOLE TRADERS:

• Business owned and operated by 1 person

• Common due to few legal regulations

PARTNERSHIPS:

Agreement between 2 or more people to own, run, and finance a business jointly

NOTE: an incorporated business is:

• A company that exists separately from owners and continues even if 1 died

• A company can make accounts or legal agreements

• Company accounts are separate from owner's accounts

PRIVATE LIMITED COMPANY:

Shareholders: people that buy shares in the company and appoint directors to run business

FRANCHISES:

• A franchise is granted by the owner of a firm (the franchisor) to another individual or business (the franchisee) to use their business idea. Examples include McDonald's, Sephora, Carrefour, etc.

Credits of the table: Cambridge IGCSE and O Level Business Studies 5th edition (Karen Borrington  Peter Stimpson)

JOINT VENTURE:

• It is an agreement between two or more businesses to work together on a project

• Example: Microsoft and General Electric

• Advantages:  

1. Each company adds a unique set of skills to the joint venture

2. The market potential of all joint venture enterprises is expanded

3. Lowers risks and costs

4. Businesses can profit from the sharing of market and product expertise.

• Disadvantages: 

1. If 1 of the companies does a mistake this will reflect badly on all businesses involved (can lead to bad reputations)

2. Due to different backgrounds of each business, this can lead to ineffective/slow decision-making and disagreements

PUBLIC SECTOR ORGANIZATIONS:

• They are owned by the government and their main aim is not profit (unlike private sector businesses)

• They aim to provide services to people such as healthcare, education, etc., keep prices low in order for everyone to afford the services, and employ people

• Advantages: 

1. Provide essential services

2. Rescue important failing businesses

3. Cuts waste in an industry

4. Owns industries that are too important to be controlled by private people (like water/electricity)

• Disadvantages: 

1. No competition

2. Employee motivation is low since profit is not the main aim

3. Subsides can lead to inefficiency

NOTES DONE BY FARIDA SABET

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