Sole traders, Partnerships, and Social Enterprises

Entrepreneurs : people who set up businesses and take risks.

Organisers: they organise factors of production, buy, hire resources (materials, labour - people employed in a business/used in production, equipment, etc.), give instructions, make arrangements, setting up system.

Innovators (someone who introduces changes & new ideas): try to make money out of a business idea.

Risk takers: risk losing any money they into the business or more.

Decision makers: they need to take decisions regarding: product design, choice of production method, how to raise finance, wages, prices, etc.

2 types of businesses

Incorporated:

  • seperate legal identity from that of its owners.
  • often called limited companies.
  • owned by shareholders.

Unincorporated:

  • no legal difference between the owner & the business.
  • carried in the name of the owner
  • owned by a person/ small group of people

Sole trader: a business by a single person who has unlimited liability - owner of a business is personally liable for all business debts.

Disadvantages:

  • unlimited liablity -> responsible for the debts of the business.
  • more responsibility -> relies heavily on their ability to make decisions -> may work long hours & have limited holiday, as there is no one to cover them.
  • limited sources of resources.

Advantages:

  • profit -> no need to share.
  • making decisions -> without consulting others.
  • own business -> free to choose.
  • independence -> can work at own pace set.
  • easy to set up -> few formalities -> therefore cheaper to set up.
  • have a job -> may not be able to find one elsewhere.

Partnerships: an unincorporated business that is owned by 2 to 20 people that has unlimited liability.

Limited partnership

Unlimited partnership

Disadvantages:

  • partners may disagree -> time used up in discussion -> decisions take longer.
  • profits will be shared.
  • some partners may not work hard as others -> lead to fights.
  • continuity -> effect on surviving partners if one leaves.
  • unlimited liability.

Advantages:

  • raise more capital.
  • extra skills -> may be to specialise in aspects of business to provide a better service.
  • more people to make decisions -> more approach to running the business -> more ideas which may lead to success.
  • shared responsiblity & more flexibility -> reduce pressure on individuals -> debts/losses can be shared.
  • easy to setup -> may involve no legal requirements -> deed of partnership - binding legal doument that states formal rights of partners.

audits: official examination of a company's financial records in order to check that they are correct.

  • limited liability - business owner is only liable for the original amount of the money.
  • provide capital but take no part in the management of the business.

Social enterprises: businesses that aimes to improve human or environmental well being.

  • have a clear social and/or environmental mission.
  • generate most of their income through trade or donations.
  • reinvest most of their profits.
  • are majority controlled in the interests of the social mission.
  • are accountable and transparent.

Different forms

Charities:organisations that give money, help, or goods to people who are poor, sick or in need

Cooperatives - *company, factory or organisation in which all the people working there own an an equal share of it.

Consumer cooperatives: cooperatives that is owned by its customers.

Worker cooperatives: are businesses in which its employees share ownership.

Retail cooperatives: people work together to assert their purchasing power.