Introducing the "GCSE Business Studies Revision Guide: Units 2 and 3"
What's Inside?
1️⃣ Comprehensive Coverage: Dive deep into Units 2 (Business and People) and 3 (Production, Finance, and the External Business Environment) of GCSE Business Studies. This guide provides a thorough expl...
Unit 3: PRODUCTION, FINANCE AND THE EXTERNAL
BUSINESS ENVIRONMENT (Exam = 1.5 hours – Case
Study)
This revision book is split into the two units. A glossary
of key terms for unit 3 is at the end of the booklet. You
will also be provided with some model answers for unit 3
at a later date.
A copy of the diagnostic that you completed in class has
been included for your own use.
This revision guide has been written by the Business
Studies Department – St Crispin’s School.
, Unit 2: Business and People
TYPES OF BUSINESS ORGANISATIONS
Unincorporated business = sole traders and partnerships
Incorporated business = limited companies
Other types of business organisations = franchises,
multinationals, public corporations, charities (not-for-
profit organisations), co-operatives
Sole traders (sole proprietors)
A sole trader describes any business that is owned and controlled by one person -
although they may employ workers. Individuals who provide a specialist service like
plumbers, hairdressers or photographers are often sole traders.
Sole traders do not have a separate legal existence from the business. In the eyes of the
law, the business and the owner are the same. As a result, the owner is personally
liable for the firm's debts and may have to pay for losses made by the business out of
their own pocket. This is called unlimited liability.
Advantages
It is easy to set up as no formal legal paperwork is required.
Generally, only a small amount of capital needs to be invested, which reduces the initial
start-up cost.
As the only owner, the entrepreneur can make decisions without consulting anyone else.
Disadvantages
The sole trader has no one to share the responsibility of running the business with. A
good hairdresser, for example, may not be very good at handling the accounts.
Sole traders often work long hours. They may find it difficult to take holidays or time
off if they are ill.
They face unlimited liability if the business fails.
, Partnerships – Between 2 and 20 partners
In case disagreements between partners occur is is a good
idea for a DEED OF PARTNERSHIP to be drawn up.
This is a legal document stating the responsibilities of
partners, for example, how profits and losses are to be
shared; how the business is to operate.
Dental surgeries are often partnerships
Doctors, dentists and solicitors are typical examples of professionals who may go into
partnership together and can benefit from shared expertise. One advantage of
partnership is that there is someone to consult on business decisions.
The main disadvantage of a partnership comes from shared responsibility. Disputes
can arise over decisions that have to be made, or about the effort one partner is putting
into the firm compared with another. Like a sole trader, partners have unlimited liability.
FRANCHISES
An entrepreneur can opt to set up a new independent business and try to win customers.
An alternative is to buy into an existing business and acquire the right to use an existing
business idea. This is called franchising.
A franchise is a joint venture between:
A franchisee, who buys the right from a franchisor to copy a business format.
And a franchisor, who sells the right to use a business idea in a particular location.
Many well-known high street opticians and burger bars are franchises.
Opening a franchise is usually less risky than setting up as an independent retailer. The
franchisee is adopting a proven business model and selling a well-known product in a
new local branch. However, the independent retailer will have less control and will have
to pay part of it’s profit to the franchisor as a ROYALTY PAYMENT.
CO-OPERATIVES
A cooperative may also be defined as a business owned and controlled equally by the
people who use its services or by the people who work there.
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