Business Structure
Chapter 2
1.) Economics Sectors
These are various stages in a business activity.
Primary Sector = Business involves in natural resources extension
Secondary Sector = Business involves the process of natural resources
Tertiary sector = These are the businesses that provide services.
Industrialization
Industrialization is when a country moves from primary sector to a secondary
sector with more industries than primary sector business.
De-Industrialization
When you are moving from the secondary sector to a primary sector.
Public Sector = Owned and Control by the government/state
Private Sectors = Owned and controlled by a private industry.
2.) Business Ownership
Incorporated (Limited Public and Limited Private)
Unincorporated (Sole Trader and Partnership)
Sole Traders
These are controlled by single owner and is an unincorporated business which
is owned and controlled by single owner.
Advantages
Less Legal Formalities
Independence
Easier To Maintain
,Disadvantages
Limited Finances
Risk And Loss to The Owner
Unlimited Liability
Partnership
A partnership is an unincorporated business structure where 2 or more
individuals owns and controls an organization. This business is based on
partnership agreements. This agreement includes the following:
1. Investments Details
2. Proft And Loss Sharing Ratio
3. Drawing Allowed or Not
Advantages Of Partnership
Additional finances are now available as our partner will invest.
Losses are now divided.
More inflow of ideas form partners.
Disadvantages of A Partnership
Unlimited Liability
Lack Of Continuity
Profits Will be divided.
Conflicts chances
The decision of any one partner can hold the whole business
accountable.
Incorporated Business
Private Limited Company
This is the incorporated business structure which can sell their shares to family,
friends, and employees.
Documents Made
1. Memorandum of Association (Name, Address, Founder, Products)
2. Articles Of Association (Rules and Regulations, SOPS)
, Advantages
Owners can have limited liability.
There is continuity even if the owner dies.
Private limited company have a better status as compared to
unincorporated.
Original owners might be better able to retain control.
Disadvantages
Various legal formalities should be followed.
Shares cannot be issued to the public.
It will be difficult to buy and sell shares as they will not be listed on the
stock exchange.
Public Limited Company
This is also an incorporated company which is listed on the stock exchange and
can sell their shares to the public.
Advantages Of Public Limited
More Pool of finances are available.
Limited liability for the owners
Continuity
Separate legal identity of the business.
Disadvantages of Public Limited
Increased Formalities
Lack Of Secrecy =accounts will be available to the public
The risk of takeover increased and control will be diluted.
The director needs to keep the investor satisfied.
3.) Other Forms of Business
Franchises
Franchising is a legal right to use the brand names and logos and the existing systems of the
successful business. This is done in the form of a legal agreement between the franchisor and the
franchisee.
Chapter 2
1.) Economics Sectors
These are various stages in a business activity.
Primary Sector = Business involves in natural resources extension
Secondary Sector = Business involves the process of natural resources
Tertiary sector = These are the businesses that provide services.
Industrialization
Industrialization is when a country moves from primary sector to a secondary
sector with more industries than primary sector business.
De-Industrialization
When you are moving from the secondary sector to a primary sector.
Public Sector = Owned and Control by the government/state
Private Sectors = Owned and controlled by a private industry.
2.) Business Ownership
Incorporated (Limited Public and Limited Private)
Unincorporated (Sole Trader and Partnership)
Sole Traders
These are controlled by single owner and is an unincorporated business which
is owned and controlled by single owner.
Advantages
Less Legal Formalities
Independence
Easier To Maintain
,Disadvantages
Limited Finances
Risk And Loss to The Owner
Unlimited Liability
Partnership
A partnership is an unincorporated business structure where 2 or more
individuals owns and controls an organization. This business is based on
partnership agreements. This agreement includes the following:
1. Investments Details
2. Proft And Loss Sharing Ratio
3. Drawing Allowed or Not
Advantages Of Partnership
Additional finances are now available as our partner will invest.
Losses are now divided.
More inflow of ideas form partners.
Disadvantages of A Partnership
Unlimited Liability
Lack Of Continuity
Profits Will be divided.
Conflicts chances
The decision of any one partner can hold the whole business
accountable.
Incorporated Business
Private Limited Company
This is the incorporated business structure which can sell their shares to family,
friends, and employees.
Documents Made
1. Memorandum of Association (Name, Address, Founder, Products)
2. Articles Of Association (Rules and Regulations, SOPS)
, Advantages
Owners can have limited liability.
There is continuity even if the owner dies.
Private limited company have a better status as compared to
unincorporated.
Original owners might be better able to retain control.
Disadvantages
Various legal formalities should be followed.
Shares cannot be issued to the public.
It will be difficult to buy and sell shares as they will not be listed on the
stock exchange.
Public Limited Company
This is also an incorporated company which is listed on the stock exchange and
can sell their shares to the public.
Advantages Of Public Limited
More Pool of finances are available.
Limited liability for the owners
Continuity
Separate legal identity of the business.
Disadvantages of Public Limited
Increased Formalities
Lack Of Secrecy =accounts will be available to the public
The risk of takeover increased and control will be diluted.
The director needs to keep the investor satisfied.
3.) Other Forms of Business
Franchises
Franchising is a legal right to use the brand names and logos and the existing systems of the
successful business. This is done in the form of a legal agreement between the franchisor and the
franchisee.
