Enterprise, social enterprise and business structure

Starting and structuring a business

Every business begins with an entrepreneur who spots an opportunity and takes a risk. The legal structure chosen decides who owns it, who controls it, and who bears the losses. This lesson covers enterprise, business plans, social enterprise, the economic sectors and legal structures.

The entrepreneur

An entrepreneur identifies an opportunity, combines resources, and takes the risk of starting a business. Qualities: innovation, determination, risk-taking, self-confidence, and the ability to persuade and lead. Entrepreneurs create jobs, competition and innovation, and drive economic growth.

Business plans

A business plan sets out the objectives, market, marketing, operations, people and financial forecasts. Benefits: it helps raise finance, clarifies thinking, and sets targets to measure progress. Limitations: forecasts may be wrong, it takes time, and a rigid plan can stop the business adapting.

Social enterprise

A social enterprise has social or environmental aims, and reinvests most profit to achieve them. Its success is judged by the triple bottom line: profit, people and planet. Benefits: social impact and loyal customers; drawbacks: lower profits and harder access to finance.

Economic sectors and ownership

Primary, secondary and tertiary sectors; as economies develop, the tertiary sector grows. The private sector is owned by individuals and shareholders; the public sector by the state. Privatisation moves businesses from public to private ownership.

Legal structures

The legal structures, with liability and the main feature of each.

Franchises

A franchisee buys the right to use a franchisor's brand, products and methods, paying a fee and royalties. For the franchisee: a proven brand and support, so lower risk of failure. Disadvantages for the franchisee: high fees and royalties, strict rules limiting independence, and dependence on the brand's reputation.

Joint ventures and other forms

A joint venture is two businesses sharing a project, its costs, risks and profits. Holding companies own controlling shares in other companies. The choice of structure depends on the finance needed, the risk, and the desire for control.

Choosing a structure

A sole trader keeps control and privacy, but has unlimited liability and limited finance. A private limited company gives limited liability and more finance, but less privacy and more regulation. The best structure depends on the owner's aims, the size of the business, and its need for capital.

Mistakes that lose marks

Mistake one: calling limited liability limited debts. Mistake two: writing advantages for the franchisor when the question asks about the franchisee. Mistake three: analysis with no link to the case business. The fix: precise terms, the right side, and the case.

The full-marks tip

The full-marks tip: in analyse questions, develop each point through a chain of reasoning, linked to the business in the case. In evaluate questions, weigh both sides and decide, with conditions.

On one card

So, on one card: enterprise and structure. Keep it for revision.