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Business Pearson Edexcel IGCSE notes on Ownership
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Ownership February 26, 2021Types of Ownership
• Sole trader
• Partnerships
• Limited companies (private and public)
• Franchises
• Social enterprises
• Multinationals
• Public corporations
Characteristics relating to size
• Concepts of risk, ownership and limited liability.
• Public corporations – reasons for and against public ownership.
• Ownership, control, sources of finance, use of profits, stakeholders and shareholders.
• Appropriateness of different forms of ownership.
Public Sector vs. Private Sector
➢ Public Sector owned and controlled by the state. Funded via taxes, government borrowing
and some charges to users. Main focus on providing services that are needed.
➢ Private sector own and controlled by an individual or groups of individuals. Funded by
personal investment, personal borrowing. Main focus on profit.
Public Corporations
➢ Includes all the organisations that are controlled by the government.
➢ Focus on customers service and are non-profit making.
Advantages of Public Corporations Disadvantages of Public Corporations
• Provides some of its services to all • Often considered to be beaurocratic.
consumer. • As there's no profit motive, there's
• As a public sector organisation, it often a lack of innovation.
faces little competition. • A change of government is likely to
• Provides services that could be mean changes in priorities and so
unprofitable if provided by firms in changes in funding and spending.
the private sector. • Can often 'crowd out' private firms.
• Provides goods and services for those
members of the community who
cannot afford them.
Sole trader
✓ Specialisation – the skills that the sole trader has.
Partnership
✓ Deed of partnership – the document that the partners complete so they know how much
control and what % of the profit each partner is entitled too.
Limited Companies
✓ Private limited company – a company whose shares are not sold on the stock market.
✓ Public limited company – a company whose shares are sold on the stock market and anyone
can buy them.
Page 1 of 5
, Ownership February 26, 2021
✓ Memorandum and Articles of Association – the two documents that must be completed
before the limited company can start trading.
✓ Shareholders – these are the owners of the business. They own a ‘share’ of the company. The
bigger their share the more control that they have.
✓ Dividends – this is the reward given to shareholders if the business makes a profit.
Franchises
✓ Franchise – a type of enterprise in which a sole trader can pay an existing business to use their
name and sell their product for a fee.
✓ Franchisee – the sole trader who runs the franchise.
✓ Franchisor – the business who allows the sole trader to use their name and sell their
products/services.
Type of enterprise Advantages Disadvantages Unlimited/Limited Liability
Sole Trader Easy to start. You have unlimited liability. Unlimited liability
This is an enterprise Get to keep all the profit. Lack of specialisation.
owned by 1 person. Get to make all the decisions. The hours will be long.
Partnership Spreads the risk. May be disagreements and Unlimited liability
This is an enterprise More people with different conflict.
owned by 2 to 20 people. specializations.
Limited Companies Limited liability. Not as easy to set up as a sole Limited Liability
This is an enterprise Easier to raise finance. trader – there are more
owned by shareholders. Tend to be large well regulations.
There are 2 types of recognized enterprises. You have to pay 2 types of tax.
limited company private
(LTD) and public (PLC)
Franchise 88% of franchises are You have to pay a % of your Limited Liability
This is an enterprise in profitable. profit each year to the
which a sole trader can You get support from the franchisor.
pay an existing business franchisor when you start the You cannot choose what you
to use their name and enterprise. sell.
sell their product for a The enterprise may already be The more well known the
fee. well known. enterprise is the more
expensive the start-up fee will
be.
Social Enterprise
• One kind of business structure that has grown rapidly in the UK in recent years is the "social
enterprise". Social enterprises are the most common form of "not-for-profit "enterprises.
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