Citizens Advice Service Essay Example for Free

Citizens Advice Service Essay Private sector means that the government does not control the ownership of a business; instead, members of the public control it. Different types of firms make up the private sector. These include sole traders, partnerships, limited companies and Public Limited Companies. Private-sectors firms are usually aiming to make a profit. Sole Trader A sole trader firm is the smallest firm from the category of private sector firms, consisting of only one owner and that owner does business in their own name. That owner has the control of the firm, and with this control, they must finance, organise and develop the firm. A typical example of a sole trader is the local corner shop, selling the essential grocery items. Advantages One main advantage is that these firms require little capital. Another advantage is that there is an incentive to work hard. This is because the firm is owned by one person, meaning that the owner must do most of the work themselves, including promote and finance the business. Therefore, if the owner wants their firm to succeed, they must work hard. If there is only one owner and possibly couple of staff in the firm, there will be regular customers known. With this relationship, customers will return repeatedly to the firm, therefore producing more sales. As there is only one owner, business decisions can be made quickly as there will not be other people interfering. Business decisions are vital for the firm to proceed, so the quicker a decision can be made, the quicker the outcome. This advantages the owner as the outcome can benefit their company. Disadvantages One disadvantage is it can be difficult to raise and find capital meaning that it is hard to start the business and to expand. Another disadvantage is that the sole trader has unlimited liability for all debts and the owner may have to sell personal possessions to meets the debts of their business. Illness is a disadvantage to a sole trader. If the owner is sick, the business may be closed for a time and money is not made to pay expenses that the owner has. Another disadvantage is the long hours may be necessary for the business to succeed. If the owner is not willing and determined to work long hours, the business will not succeed and this may produce debts. With sole traders, the success of the business relies on the skills of the owner. If the owner has no experience of running a business or business skills, this may cause the business to fail. Partnership A partnership firm is one with 2-20 owners and these owners share the responsibly of running the firm together as the control is divided up equally between the partners. An example of a business of the partnership type is a firm of doctors. Advantages As there are a number of people, more capital can be raised as all the partners contribute to the business. Each partner has their own skills and between them, the partners have more skills, ideas and knowledge than a single person does. Partners with different skills can specialise in their own areas and this increases the ranges of service that customers are offered. In a partnership, any problems Passive Voice (consider revising). Another advantage is regular customers will be known and these customers will return repeatedly to the firm, therefore producing more sales that advantage the firm. Disadvantages With partnerships, the partners have unlimited liability for all the debts. This could lead to the partners selling their personal possessions to help pay off the company’s debts. A main disadvantage is when a partner makes a mistake, that mistake affects all the partners and the firm. This is a disadvantage because a mistake can affect the running and the flow of the firm. The profits of the business must be shared. This can be a disadvantage because the partners may think that a person in the partnership should not get the same amount of money because it seems that they have not put as much work into the firm. This then creates conflict and affects the way the firm runs. Private Limited Company (Ltd) A private limited company has one or more owners, with the directors of the company elected by the shareholders. These directors control and have the responsibly of running the firm. An example of a private limited company could be a garage. Advantages There is limited liability as shareholders can lose only the amount they have invested into the firm, no matter how much money that firm owes. Shareholders contribute capital and there is no fixed amount. This is an advantage because as more shareholders invest money, whatever the amount, the more chance the firm is going to success and grow with the money. Private limited companies are protected from takeovers. This is because shares cannot be exchanged to other people unless all the shareholders agree. In addition, the members of the public cannot bring the shares. This is an advantage as this gives the owners of the firm direct control of the business.