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Business organisations in the private sector.

Extracts from this document...

Introduction

ANNIE MACKENZIE HE ACCESS TO BUSINESS STUDIES & COMPUTING BUSINESS ORGANISATIONS IN THE PRIVATE SECTOR ASSIGNMENT NO.1A INTRODUCTION Within the UK economy all businesses fall into one of three sectors. * Voluntary - This is sector where non-profit making organisations operate. The aim of businesses within this sector is not to make a profit but to carry out charitable objectives. An example of a business within this sector is the RSPCA who provide shelter and new homes for animals. * Private Sector - The businesses operating within the private sector of our economy are owned by private individuals and shareholders. Business within this sector is market driven, where companies seek to maximise profit by acting in response to changes in the demand of consumers. * Public Sector - The public sector of the UK economy is where you will find the public, government and local authority funded business. An example of a public sector business is the publicly funded BBC who provide television and radio broadcasts to the nation. PRIVATE SECTOR BUSINESS ORGANISATIONS SOLE TRADERS OWNERSHIP The owner of a sole trader business is the individual who owns and operates the business. Although there may be additional staff the owner is the only person who benefits from the businesses financial success or bears the responsibility of failure. FORMATION The formation of a sole trader business is the simplest formation of all. The law does not differentiate between the business and the owner therefore, the owner has unlimited liability. This means that the owner himself is liable to lose everything he has if the business incurs such debts. If insufficient funds to clear the debt can be raised the individual will be made bankrupt. ...read more.

Middle

Other sources of finance can be: - * Bank loan * Bank overdraft * Debenture loan (long term loan repayable at a given date which is secured on specific assets) * Trade credit (suppliers agreeing to accept payment at a later date) * Debt factoring (when a firm sells it's debt to a factor, it receives the payment of the debt immediately minus the factor fee.) * Leasing (rather than purchasing an asset the business can rent it from a leasing company avoiding spending large amounts purchasing it.) * Reinvested profit. The government may also be able to assist the partnership with taxation, retirement, health and safety requirements and employment protection. See the fact sheet on sources of Government finance and assistance for small businesses for more details of the above together with details of where businesses can obtain information and advice. PRIVATE LIMITED COMPANIES OWNERSHIP A private limited company is owned by shareholders. Each shareholders investment is represented by the number of shares they own. Each shareholder receives dividend payments from the companies profit relative to the proportion they own. FORMATION A company that is formed by the issue of shares goes through the process of incorporation, which gives the organisation a separate legal identity to its owners. This means that the shareholders will have the benefit of only having limited liability. Limited liability enables the shareholders to know that they will lose no more than they invested should the company be unable to pay its debts. In order to become a separate legal identity to its owners, the company must complete two documents: * The Memorandum of Association - which deals with the companies overall make up. ...read more.

Conclusion

The reason for this is that clients prefer to deal with one firm for all their needs. A client may deal with a solicitor specialising in conveyancing when they sell their house, probate when they make a will, litigation when they get divorced or company law when they are unfairly dismissed all within the same firm of solicitors. As you can see, there are many different specialities, which involve different skills and knowledge. By forming a partnership a group of solicitors are able to not only gain more capital but also strengthen the business and increase the services they offer. A tertiary business such as a firm of solicitors relies heavily on creating a strong customer base for itself therefore if they can provide a very comprehensive service to their clients, they can hope it will generate more business and greater profits in the future. The disadvantages of a partnership are that each individual has less control than if they were working as a sole trader. Decision making must be shared between the partners as well as profits and the work load. Occasionally there may be unavoidable disagreements between partners. For example, within a firm of solicitors it may happen that there is very little litigation or probate work but at the same time lots of people are selling their properties. This could mean that while one partner is working lots of extra hours, others are able to go home early but still receive the same share of the profit. Another disadvantage of a partnership is that each partner still has unlimited liability. Therefore, should one partner make a grave mistake and the business collapse, all partners are liable to be made bankrupt if the business cannot pay its debts. ...read more.

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