OrganisationsOrganisations

30/08/1030/08/10

Small BusinessesSmall Businesses

• We can tell a small business by:We can tell a small business by:• How many branches it has or if it has How many branches it has or if it has

only oneonly one• It employs less than 50 peopleIt employs less than 50 people• It doesn’t make a big profit It doesn’t make a big profit • It doesn’t have a wide variety of It doesn’t have a wide variety of

products to sell or produce.products to sell or produce.• They tend to be local businesses and They tend to be local businesses and

sell their goods in the local areasell their goods in the local area

Show examples of local small Show examples of local small businessesbusinesses

• Yell.comYell.com

• Florist, hairdresser, corner shopFlorist, hairdresser, corner shop

• Put their namePut their name

• Picture of what they do.Picture of what they do.

Medium sized businessesMedium sized businesses

• May have more than one branch – they May have more than one branch – they may be seen in more than one place may be seen in more than one place and may be national.and may be national.

• Employs up to and around 250 peopleEmploys up to and around 250 people

• It makes fairly good profitsIt makes fairly good profits

• It has a variety of goods and services It has a variety of goods and services

• It is quite well-known across the It is quite well-known across the countrycountry

ExamplesExamples

• NextNext

• BellsBells

• BarrsBarrs

• Kwik FitKwik Fit

• BHSBHS

• SPARSPAR

Large OrganisationsLarge Organisations

• Large organisations employ more than 250 Large organisations employ more than 250 people and can employ hundreds of people and can employ hundreds of thousands of peoplethousands of people

• Known world wideKnown world wide

• Branches across the worldBranches across the world

• They make very large profitsThey make very large profits

• They produce a wide variety of goods or They produce a wide variety of goods or servicesservices

• Sometimes they are known as multi-nationalsSometimes they are known as multi-nationals

Examples of Large Examples of Large organisationsorganisations

• NikeNike• AdidasAdidas• RBSRBS• BPBP• McDonaldsMcDonalds• Burger KingBurger King• KFCKFC• HSBCHSBC• SantanderSantander

Types of OrganisationsTypes of Organisations

• The businesses we have in the UK The businesses we have in the UK range from very small organisations range from very small organisations to very large organisations.to very large organisations.

• Firstly we are going to look at small Firstly we are going to look at small organisationsorganisations

Sole TradersSole Traders

• One person owns and controls these One person owns and controls these types of organisations.types of organisations.

• This one person makes all the This one person makes all the decisions about the business.decisions about the business.

• The owner will employ people to help The owner will employ people to help with the work of the organisation.with the work of the organisation.

• Examples – local hairdresser, corner Examples – local hairdresser, corner shop, local butcher, plumbershop, local butcher, plumber

AdvantagesAdvantages

• The sole trader is their own boss – job The sole trader is their own boss – job satisfactionsatisfaction

• The sole trader makes all the decisions so The sole trader makes all the decisions so runs the business the way they want toruns the business the way they want to

• Sole trader gets to keep all their profitSole trader gets to keep all their profit• Easy to set up there are no legal Easy to set up there are no legal

requirements requirements • Can be quite inexpensive to set upCan be quite inexpensive to set up• Can develop their own ideasCan develop their own ideas

DisadvantagesDisadvantages

• No one to cover for the owner if they No one to cover for the owner if they are sick or want to go on holiday.are sick or want to go on holiday.

• No one to help make the decisions No one to help make the decisions and bounce ideas offand bounce ideas off

• Difficult for sole traders to raise Difficult for sole traders to raise money from bank loans as they are money from bank loans as they are seen as a riskseen as a risk

• If the business makes a loss the sole If the business makes a loss the sole trader has to cover this loss.trader has to cover this loss.

• If the business goes bankrupt then If the business goes bankrupt then the sole trader may have their the sole trader may have their personal possessions sold off to personal possessions sold off to cover the debt – this is called cover the debt – this is called UNLIMITED LIABILITYUNLIMITED LIABILITY

Partnerships (6/9/10)Partnerships (6/9/10)

• A sole trader may decide to become A sole trader may decide to become a larger business by bringing in a a larger business by bringing in a partner or some businesses may partner or some businesses may start off as a partnership.start off as a partnership.

• There is a minimum of 2 partners There is a minimum of 2 partners and a maximum of 20 with the and a maximum of 20 with the exception of lawyers, dentists and exception of lawyers, dentists and architects.architects.

AdvantagesAdvantages

• More than one person to share the More than one person to share the workload – helps with holidays, illness etc.workload – helps with holidays, illness etc.

• More ideas – as the partners can bounce More ideas – as the partners can bounce ideas off each otherideas off each other

• Some of the partners may be specialists in Some of the partners may be specialists in certain areas eg finance or marketing so certain areas eg finance or marketing so they improve the businessthey improve the business

• More money in the business as each More money in the business as each partner will have invested moneypartner will have invested money

Advantages contAdvantages cont

• Partners will share the loss of the Partners will share the loss of the organisation – not just one person organisation – not just one person having to take all the loss.having to take all the loss.

DisadvantagesDisadvantages

• Sharing in decision making might be Sharing in decision making might be difficult if partners have different ideas difficult if partners have different ideas about how the company should progress.about how the company should progress.

• Partnerships still have unlimited liability but Partnerships still have unlimited liability but they share the liabilitythey share the liability

• Share the profits between them – if one Share the profits between them – if one partner has invested more than another partner has invested more than another they will get a bigger share of the profit.they will get a bigger share of the profit.

• Creating a partnership means creating a Creating a partnership means creating a Deed of Partnership and so can be Deed of Partnership and so can be expensive as lawyers need to be brought inexpensive as lawyers need to be brought in

Partnerships contPartnerships cont

• They have to draw up a Deed of Partnership They have to draw up a Deed of Partnership detailing how much each partner puts in, detailing how much each partner puts in, their share of the profit etc.their share of the profit etc.

• If one partner invests more money than If one partner invests more money than another they may get more profit.another they may get more profit.

• If one partner wishes to leave the business If one partner wishes to leave the business has to be closed down and started again.has to be closed down and started again.

• There may be a sleeping partner who There may be a sleeping partner who invests money in the business but are not invests money in the business but are not involved in the running of it.involved in the running of it.

Private Limited CompaniesPrivate Limited Companies

• Medium-sized organisations – Ltd Co in its Medium-sized organisations – Ltd Co in its name. These organisations have limited name. These organisations have limited liability and the owners only lose how much liability and the owners only lose how much money they invested in the business if it goes money they invested in the business if it goes bust. The owners are called bust. The owners are called shareholdersshareholders at at least 2 shareholders. The shares least 2 shareholders. The shares are notare not sold sold on the stock market, the shares are usually on the stock market, the shares are usually owned by family members or the people who owned by family members or the people who originally set up the company. If a shareholder originally set up the company. If a shareholder wishes to sell their shares then the others have wishes to sell their shares then the others have to agree to whom the shares are being sold to.to agree to whom the shares are being sold to.

AdvantagesAdvantages

• No unlimited liabilityNo unlimited liability

• New shares in the company can be issued New shares in the company can be issued and so raise more money for the company.and so raise more money for the company.

• Easier to get bank loansEasier to get bank loans

• Can bring in new shareholders if the Can bring in new shareholders if the company wants to growcompany wants to grow

• Shareholders may specialise in certain Shareholders may specialise in certain areas of the business eg finance and so this areas of the business eg finance and so this will help the company to improvewill help the company to improve

DisadvantagesDisadvantages

• Can be expensive to set up – a Ltd Can be expensive to set up – a Ltd Co has to register their company at Co has to register their company at Companies House – also legal Companies House – also legal procedures to go throughprocedures to go through

• Not as easy to set up a Ltd CoNot as easy to set up a Ltd Co

• More difficult to make decisions as all More difficult to make decisions as all the shareholders will have a vote on the shareholders will have a vote on decisionsdecisions

Public Limited Companies Public Limited Companies PlcsPlcs• These are very large well-known These are very large well-known

organisations – have Plc after their organisations – have Plc after their name. Their shares are sold on the name. Their shares are sold on the stock market, this gives them their title - stock market, this gives them their title - they can be sold to the public. They can they can be sold to the public. They can have thousands of shareholders. Each have thousands of shareholders. Each year they hold an AGM (Annual General year they hold an AGM (Annual General Meeting), shareholders are invited to Meeting), shareholders are invited to attend and put across their points of attend and put across their points of view about the organisation.view about the organisation.

Plcs contPlcs cont

• Shareholders vote on the Board of Shareholders vote on the Board of Directors at the AGM, then a Directors at the AGM, then a Managing Director is voted on and Managing Director is voted on and takes responsibility for the running of takes responsibility for the running of the organisation.the organisation.

Advantages of PlcsAdvantages of Plcs

• Shareholders have limited liabilityShareholders have limited liability

• Easy to raise finance as banks trust Easy to raise finance as banks trust Plcs to be able to pay them backPlcs to be able to pay them back

• Unlikely to be a start up business so Unlikely to be a start up business so they are more securethey are more secure

DisadvantagesDisadvantages

• Expensive to set upExpensive to set up

• Accounts have to be published, therefore Accounts have to be published, therefore everyone can see the organisation’s everyone can see the organisation’s financial situationfinancial situation

• Have to register with Companies House Have to register with Companies House and go through a legal processand go through a legal process

• Organisation has to prove itself before its Organisation has to prove itself before its shares can be sold on the stock marketshares can be sold on the stock market

Public SectorPublic Sector

• Owned by the government on behalf Owned by the government on behalf of the publicof the public

• Controlled by government ministers Controlled by government ministers and trusts and trusts

• Financed by taxation, government Financed by taxation, government borrowingborrowing

• Examples – National Health Service, Examples – National Health Service, Armed Forces, EducationArmed Forces, Education

Private SectorPrivate Sector

• Owned by private individuals or Owned by private individuals or groups of individualsgroups of individuals

• Controlled by owners/shareholdersControlled by owners/shareholders

• Financed by bank loans, owners Financed by bank loans, owners investments, new share issuesinvestments, new share issues

• Examples – Next, Marks and Examples – Next, Marks and Spencers, BP, local corner shopsSpencers, BP, local corner shops

Voluntary SectorVoluntary Sector

• Not really owned by anyone, set up by Not really owned by anyone, set up by individuals who want to help othersindividuals who want to help others

• Controlled by TrusteesControlled by Trustees

• Financed by donations from the publicFinanced by donations from the public

• Examples – Oxfam, Red Cross, British Examples – Oxfam, Red Cross, British Heart Foundation etcHeart Foundation etc