AQA GCSE 3.1.2 BUSINESS OWNERSHIP.pptx

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Topic: 1 BUSINESS IN THE REAL WORLD

1.2 BUSINESS OWNERSHIP

AQA GCSE BUSINESS 8132

Starter questions:

1. What is the main aim of a business?

2. Identify the four factors of production.

3. Explain why each factor of production is needed for a business to be successful.

4. Identify the three sectors of industry.

5. Explain what each sector is involved with and give two examples of industries that operate in each sector.

6. What is an entrepreneur?

7. Suggest three reasons why an entrepreneur might set up a business

8. Identify 3 characteristics of an entrepreneur

Topic: 1 BUSINESS IN THE REAL WORLD

1.2 BUSINESS OWNERSHIP

AQA GCSE BUSINESS 8132

Starter questions:

1. What is an entrepreneur? (2 marks)

2. What is a sole trader? (2 marks)

3. What is a partnership? (2 marks)

4. State and explain two reasons why an entrepreneur prefer to set up as a sole trader instead of a partnership? (4 marks)

5. State and explain two reasons why an entrepreneur prefer to set up as a partnership business (4 marks)

6. Define unlimited liability (2 marks)

7. Explain one reason why entrepreneurs might prefer to set up as a private limited company (4 marks)

Topic: 1 BUSINESS IN THE REAL WORLD

1.2 BUSINESS OWNERSHIP

AQA GCSE BUSINESS 8132

Starter questions:

1. Explain one reason why entrepreneurs might prefer to set up as a private limited company (4 marks)

2. Explain why a Ltd might wish to convert to a PLC (4 marks)

3. Suggest 2 advantages of setting up a “not for profit” business

Topic: 1 BUSINESS IN THE REAL WORLD

1.2 BUSINESS OWNERSHIP

AQA GCSE BUSINESS 8132

Starter questions:

1. State and explain two reasons why an entrepreneur prefer to set up as a sole trader instead of a partnership? (4 marks)

2. State and explain two reasons why an entrepreneur prefer to set up as a Ltd instead of a partnership business (4 marks)

3. What does “floating” on the stock market mean? (2 marks)

4. Why might someone want to buy shares? (2 marks)

5. Why might a business want to sell shares? (2 marks)

1.2.BUSINESS OWNERSHIP

• IN THIS UNIT YOU WILL LEARN:

  • Different structure

    • Sole traders

    • Partnerships

    • Private limited companies (ltd)

    • Public limited companies (plc)

    • Not for profit organisations

Legal structure

• Legal structure is the type of ownership that a business chooses

• This influences:

  • The number of owners

  • The responsibilities of the owners

  • How tax is paid

  • How finance can be raised

  • Who makes decisions

  • How profits are shared

SOLE TRADER

• A sole trader is an individual who owns and runs their own business

• The simplest form of business

• A sole trader has unlimited liability - they are personally responsible for all debts run up by the business

• They could lose their home and all of their assets to pay off any debts that they are unable to pay

Can you explain the terms assets and liabilities?

SOLE TRADER

Explain the term unlimited liability.

Explain why this is a disadvantage?

BUSINESS OWNERSHIP

Sarah has always dreamt of being her own boss and at the age of just 22 an opportunity arose. Patricia, the owner of the gift shop where Sarah worked, was due to retire and close the business that she had operated as a sole trader for over 40 years. Sarah wondered whether she had the necessary skills to run the shop herself and finally plucked up the courage to talk to her boss about her buying the shop.

1. What is meant by the term ‘sole trader’?

2. Explain one advantage of Patricia running the shop as a sole trader.

3. Explain one disadvantage of Patricia running the shop as a sole trader.

4. Identify and explain three skills Sarah would need to operate the shop as a sole trader.

PARTNERSHIP

• A partnership is where two or more people run the business

• Each partner is equally responsible for debts incurred

• Each partner will take a share of the profits

• Each partner usually shares in the decision making

• ‘Sleeping’ partners invest in, but do not run, the business

• Normally partnerships have unlimited liability but now limited liability partnerships are coming more common

• Partnerships are often found in professions e.g. doctors, accountants, solicitors

If you were to set up a business would you prefer to be a sole trader or a partnership?

Justify your decision.

Business Ownership - starter

PARTNERSHIP

What qualities would you look for in a partner?

Challenge

Can you work out what proverbs these abbreviations stand for?

• A P S I A P H

Clue: when things aren’t going to plan do you ever chat to a friend about it?

• G M T A

Clue: you and I are thinking the same thing!

• F S D

Clue: when is the last time you and a friend had the same silly idea?

• T M C S T B

Clue: the soups burnt thanks to everyone involved

Which of these could you apply to a partnership?

Private Limited Companies (ltd)

Private limited companies exist in their own right.

• The owners and the company are separate legal entities

• Therefore, the company’s finances are separate from the owner’s personal finances

• Shareholders are the owners of Private Limited Companies

  • They own part of the company in return for the finance invested

  • They will be rewarded with dividends – a share of the profit

• Shareholders have limited liability – they are not responsible for the company’s debts

• Shareholders can only lose the money that they have invested, or promised to invest, in the business in the form of shares

• A private limited company has ltd after its name

• It can only sell shares to family and friends

Is Snapchat really worth $25bn?

What is meant by the term flotation?

Private Limited Companies (ltd)

Why might one business want to see the accounts of another?

Private Limited Companies (ltd)

Incorporation

Private Limited Companies must be registered (Incorporated) at Companies House.

They must send to the Registrar of Companies the following:

1. A Memorandum of Association – name, registered office and what the company will do

2. Articles of Association – the rules of running the company

They must deliver to Companies House each year a true and fair

set of accounts

In the examination you are not expected to have an understanding of the legal process of incorporation.

Choosing the appropriate legal structure

Sarah has spoken to Patricia about her idea of buying the shop and was delighted by Patricia’s response. Patricia was thrilled to think the business she had built up would continue to exist after her retirement and started the process of valuing the business. That night Sarah told her boyfriend Bobby of her idea. Bobby had just been made redundant and offered to share the business with Sarah, thinking they could set it up either as a partnership or a private limited company.

1. What is meant by the term ‘partnership’?

2. What is meant by the term ‘limited company’?

3. Explain 2 advantages of Sarah accepting Bobby’s offer of sharing the business.

4. Explain 2 drawbacks of Sarah accepting Bobby’s offer of sharing the business.

Public Limited Company

• Public Limited Company has PLC after its name

  • What does a Private Limited Company have?

• A PLC must have issued at least £50 000 worth of shares

• At least 25% (£12 500) of shares have to be paid up i.e. they have been paid for

• A PLC can sell shares to the general public

• A PLC can be listed on the Stock Exchange

Advantages of a PLC

• Flotation on the stock market allows access to a larger pool of finance

• PLCs tend to be large, stable companies meaning it is easier to access further finance from banks

• Enhanced reputation of the company due to its plc status

• The company gains exposure through the Stock Exchange

Flotation occurs when an organisation makes an offer of shares to the public (Initial Public Offering or IPO).

Disadvantages of PLCs

• Flotation is an expensive process and not guaranteed to be successful

• The general public can buy shares meaning that the company is open to takeovers

• Financial information is freely available for anyone to see, including competitors

• Stricter rules and regulations are placed on PLCs

The divorce of ownership and control means that the owners of the business, the shareholders, might be different than those who control it, the board of directors.

Snapchat flotation.

Public Limited Companies

You have 30 seconds to write down as many businesses as you can think of with PLC after their name, starting from NOW!

Who am I?

• I am a British company, founded in 1919

• My first days sales were £4 with a profit of £1

• I opened my first store in North London in 1929

• I became a private limited company in 1932

• I became a public limited company in 1947

• In 1979 annual sales reached £1 billion for the first time

• By 1982 this had doubled to £2 billion

• In 1992 ‘Computers for Schools’ was launched

• In 1997 Terry Leahy became Chief Executive

• By 2010 I was a multi-national company with stores in China, Japan, the USA, Malaysia, Europe and across the globe

• In March, 2011 Philip Clarke took over as Chief Executive

• In 2014 I launched a new ‘healthy living’ brand

• In July 2014 Dave Lewis became the new CEO

• In 2015 it closed its HQ in Cheshunt in Hertfordshire

• Complete the table below

NOT FOR PROFIT BUSINESSES

Not for Profit businesses do not have the primary aim of profits for their shareholders or owners but instead surpluses are used for a good cause.

It has strict guidelines and laws for its administration.

Name as many Not For Profit businesses as you can in two minutes.

2 minutes

End

Share all of your examples as a class. Next to each organisation write what their objective is

Review your understanding

• Draw a mind map to show your understanding of legal structure – sole traders, partnerships, private limited companies, public limited companies

• In each case make reference to:

  • Management and control

  • Sources of finance available

  • Liability

  • Distribution of profit

1.2 Business ownership

• IN THIS UNIT YOU SHOULD HAVE LEARNT:

  • Different structure

    • Sole traders

    • Partnerships

    • Private limited companies (ltd)

    • Public limited companies (plc)

    • Not for profit organisations