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[ AS-LEVEL BUSINESS STUDIES SECTION 1.2 REVISION NOTES]
3 sectors in Business activity
Primary sector
Secondary sector
Tertiary sector
Primary sector
Primary sector involves changing natural resources into primary products
The primary sector of the economy extracts or harvests products from the earth
Examples:
Fishing, Mining
Farming, Forestry
Secondary sector
Secondary sector converts the primary goods into manufactured goods
The secondary sector of the economy manufactures finished goods.
Examples:
Construction
Textile production
Processing
Tertiary sector
Tertiary sector is the service industry.
This sector makes the lives of people much easier by providing services
Examples:
Banking
Hair cutting
Teaching
Private sector
The sector controlled and run by private individuals and organizations
Public sector
The controlled and run by the government
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[ AS-LEVEL BUSINESS STUDIES SECTION 1.2 REVISION NOTES]
Types of business organisations
Sole trader
Partnership
Limited companies
Franchise
Joint ventures
Sole trader
A business owned and managed by one person
One person makes the decisions
Sole trader raises finance by his/her own savings, retained profits and loans
If business loses money, the sole trader has to sell his/her personal assets to pay off creditors (unlimited liability)
Partnership
The business is owned and managed by 2-20 people
Partners make the decisions
Profit is shared among the partners
Partners raise finance by putting their savings and capital into business
If business loses money, the partners have to sell their personal assets to pay off creditors (unlimited liability)
Limited company
A business owned and managed by a group of people
Directors make the decisions
Profit is shared among the shareholders
Limited companies raise finance by issuing shares
If business loses money the shareholders don’t have to sell their personal assets to repay creditors
Franchise
To use the name of a large business to conduct business activities
Franchisee uses the name
Franchisor grants the permission to franchisee to use the name for fees
Eg.
Mc Donald’s has many restaurants all over the world which are running by the franchisee
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[ AS-LEVEL BUSINESS STUDIES SECTION 1.2 REVISION NOTES]
Problems of changing from one legal structure to another
Sole trader to partnership
Partnership to private limited company
Changing from Sole trader to Partnership
Sharing profits
Interference in decision-making
Bad decision of one partner affects all partners
Changing from Partnership to limited company
Owners may lose control
Legal work required
Financial accounts have to be made public
Decrease in privacy
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