Sole Traders
It’s a business that is owned by one person
Advantages: TOTAL CONTROL, IT IS CHEAP EASY TO START UP, BUSINESS
AFFAIRS ARE PRIVATE
Disadvantages: UNLIMITED LIABILITY, IT CAN BE DIFFICULT TO RAISE
FINANCE, IT CAN BE DIFFICULT TO ENJOY ECONOMIES OF SCALE
Limited liability companies
It’s a business enterprise formed by a minimum of two shareholders, but
is a separate entity for both legal and tax purposes. In the UK the main
types of limited companies are: PRIVATE LIMITED COMPANIES(Ltds),
PUBLIC LIMITED COMPANIES(Plcs)
Multinationals
A multinational (MNC) is a company that has its headquarters in one
country but has branches or owns companies in many different
countries. Due to their large structure, multinationals can take
advantage of lower resource costs, such as raw materials and labor, in
order to lower their operating costs and be able to offer cheaper goods
and services. For this reason, multinationals are likely to locate their
operations in LDCs (Least Developed Countries). Then, by diversifying
their sales in different markets, they are able to widen their market
share and increase profits.
Advantages: CREATION OF JOBS AND A SKILLED WORKFORCE,
INVESTMENT OF CAPITAL AND TECHNOLOGY IN THE HOST COUNTRY,
PAYMENT OF TAXES TO THE HOST COUNTRY
Disadvantages: LOW WAGES AND POOR CONDITION FOR WORKERS,
EXPLOITATION OF THE ENVIRONMENT, STRONG INFLUENCE OVER
FOREIGN GOVERNMENTS, DESTRUCTION OF LOCAL BUSINESS
Partnerships
In a partnership where two or more people own and share the costs and
risks of a business. There are two types of partnership: Unlimited
partnership and Limited partnership
Deed of partnership: is a contract normally drawn up to protect the
partners from certain misunderstandings
Advantages: SHARE RESPONSIBILITY, SPECIALISATION, MORE PEOPLE
CONTRIBUTE CAPITAL TO THE BUSINESS
Disadvantages: UNLIMITED LIABILITY, DISPUTES CAN ARISE OVER
ALMOST ALL ASPECTS OF THE BUSINESS
Types of economic system
They differ according to the amount of intervention of government in
economic activities:
PLANNED ECONOMY (or command economy): Investment, production
and allocation of capital goods takes place according with the economic
plans and production plans of the government (Socialism, Communism),
Government decides economic activity
FREE MARKET ECONOMY: The private sector operating in the markets
make decisions about production, distribution, pricing and investment
(Capitalism), Minimal government intervention
MIXED ECONOMY: It blends elements of a market economy with
elements of a planned economy (The system adopted the country can
be closer to the planned or to the free market economy), Both private
and public sector have a role in the economic decisions