Forms of Business Organisation (Chapter 3 – pg. 30 to pg. 45) When setting up as an enterprise are different structures you can take. Type of enterprise Advantages Disadvantages Liability Sole Trader This is an enterprise owned by 1 person. Easy to Get to keep all the profit. Get to make all the decisions. You have unlimited liability. Lack of specialisation. The hours will be long. Unlimited liability Partnership This is an enterprise by 2 to 20 people. Spreads the risk. More people with different specializations. May be disagreements and conflict. Unlimited liability Limited Companies This is an enterprise owned by shareholders. There are 2 types of limited company private (LTD) and public (PLC) Limited liability. Easier to raise finance. Tend to be large well recognized enterprises. Not as easy to set up as a sole trader – are more regulations. You have to pay 2 types of tax. Limited Liability Franchise This is an enterprise in a sole trader can pay an existing business to use their name and sell their product for a fee. 88% of franchises are profitable. You get support from the franchisor when you start the enterprise. The enterprise may already be well known. You have to pay a % of your profit each year to the franchisor. You cannot choose what you sell. The more well known the enterprise is the more expensive the start-up fee will be. Limited Liability Co-operatives These are enterprises that are either workers by the workers or the customers. People the business will also be the owners as well and therefore they may work harder to make the enterprise a success. Decision making can be slow. The owners may lack the skills needed to run an enterprise. Limited Liability A joint venture This is when two or more businesses to start a new project together, sharing the capital, the risks and the profits. Sharing of costs Sharing of risk knowledge The profits have to be shared Disagreements may occur Different business cultures Each business has own liability depending on their
Government Policy Explanation Other Information Fiscal Policy This is any change by the government to taxes or government spending. Governments raise money to spend on things such as schools, hospitals and roads from taxes on individuals and businesses. This is known as Fiscal Policy. The main taxes are: Direct taxes Income tax Corporation tax Indirect taxes VAT Import Duties and Tariffs Monetary Policy This is changes in interest rates by the government and the central bank of a country. An interest rate is the cost of borrowing money. Monetary policy is used to set the interest rate. Changing the interest rates can help control spending (and this means helping reduce inflation if it’s too high or encourage economic growth if it has slowed down) Increasing interest Consumers and Business will less as their debts will be more expensive reducing their disposable income. This reduces inflation as there is less demand. Consumers and Businesses will borrow less as borrowing money becomes more expensive. This means they will buy less. Decreasing interest rates: Consumers and Businesses will spend more as their debts will be cheaper meaning they have more disposable income. This helps economic growth. Consumers and Business will morrow more as borrowing money becomes cheaper. This means they have more money to spend (particularly on large items) Supply Side Policy Privitatisation – moving government industries into the private sector (e.g. In the UK electricity and gas services used to