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Unit 2 - Understand Employer Organisations

  • Date Submitted: 07/13/2016 12:35 AM
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Having a good understanding of business principles is essential for any business administrator. Decisions made at different levels have implications for the wider business and often affect costs and profitability in some way.

1.1 Explain the differences between the private, public and voluntary sector

Private Sector Organisations

Private Sector organisations operate privately to make a profit with income generated from the sale of their products or services. Examples would be supermarkets, high street shops, etc. Although many private sector firms are owned and controlled by individual businessmen and women, many are owned by groups of people: for example, companies may be owned by shareholders, who have invested in that company. The private sector includes sole traders, partnerships, limited companies and public limited companies.
      - Sole Traders
An uncomplicated and straightforward structure, consisting of an individual who owns and runs the business him or herself. A sole trader is personally liable for the debts of the business, but has all the profits. The owner pays income tax on net profit via the Inland Revenue's Self-Assessment system.
      - Partnerships
A partnership is where 2 or more people come together for the purpose of operating a business. The partners share the profits on the basis of their ownership (often but not necessarily 50:50) and are personally liable for any debts of the business. There is an exception to this personal liability for partnerships where a different legal entity, a Limited Liability Partnership (LLP) is formed. In the case of LLPs, partners’ liability for business debt extends to the amount of investment they have made into the partnership.
Partnership agreements are usually drawn up to cover such issues as:
    •   Profit-sharing
    •   Drawings
    •   Benefits in kind
    •   Interest paid on capital invested in the partnership


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