Lecture Notes: Types of Business Entities

Overview

• Types of Business Entities
  • Public Sector
  • Private Sector
  • Sole Traders
  • Partnerships
  • Companies
  • Social Enterprises

Structure of the Class

• Three Parts
  1. Private and Public Sector Companies
  2. Sole Traders and Partnerships
  3. Social Enterprises
• Four Assessment Objectives
  1. Distinguish between Private and Public Sector
  2. Evaluate features of business organizations
  3. Evaluate for-profit social enterprises
  4. Evaluate non-profit social enterprises

Sectors

• Industry Sectors: Primary, Secondary, Tertiary, Quaternary
• Ownership Sectors: Public and Private
  • Public Sector: Owned by government
  • Private Sector: Owned by individuals or groups

Public Sector

• Purpose: Provide public services
• Characteristics: No profit distribution, focus on surplus
• Challenges: Less efficient, monopolistic, less innovative
• Examples: BBC, USPS, NHS, NASA

Private Sector

• Purpose: Earn profits for owners
• Characteristics: Profit-driven, competitive, innovative
• Examples: Coca-Cola, Burger King, Netflix, Apple

Business Entities

Sole Traders

• Definition: Single-person business, unincorporated
• Liability: Unlimited
• Finance: Limited access
• Risks: High personal risk, limited continuity
• Pros/Cons: Complete profit retention, closer customer relations, hard to compete with corporations

Partnerships

• Definition: Business run by 2 or more partners
• Liability: Unlimited
• Decision Making: Shared, slower
• Finance: Slightly more accessible
• Continuity: Better than sole traders, can survive partner changes
• Documentation: Partnership agreement

Companies

• Types: Privately held and Publicly held
• Characteristics: Limited liability, incorporated
• Management: Run by Board of Directors, CEO
• Finance: Greater access to capital
• Documents: Memorandum and Articles of Association, Certificate of Incorporation

Privately Held Companies

• Shares: Privately traded, family-owned
• Transparency: Lower, less public financial disclosure
• Examples: Lego, IKEA, Chanel

Publicly Held Companies

• Shares: Publicly traded, available on stock exchanges
• IPO: Initial Public Offering
• Transparency: High, financials must be public
• Examples: Coca-Cola, Apple, Microsoft

Social Enterprises

For-Profit Social Enterprises

1. Private Sector Companies: Profit is a tool for social aims
2. Public Sector Companies: Government-run, social goal oriented
   • Example: Scandinavian recycling initiatives
3. Cooperatives: Owned and operated by members for their benefit
   • Example: Swift financial messaging

Non-Profit Social Enterprises

• NGOs: Independent from government, address public issues
• Examples: Greenpeace, Amnesty International, Oxfam

Evaluation of Social Enterprises

Pros

• Customer Loyalty: Feel-good factor
• Sustainability: Socially and ecologically conscious

Cons

• Compliance Costs: High ethical standards can be costly
• Economic Sustainability: Challenging
• Decision Making: Slower due to transparency and accountability

Practical Insights

• Promotion Challenges: Difficult to target and reach audience
• Income Uncertainty: Reliance on donations
• Public Perception: Some expect free social good

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Conclusion: For a comprehensive understanding, engage with both theoretical and real-world insights into various business entities and their societal roles.