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www.fetsystem.com [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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www.fetsystem.com [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 dont 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 Donalds has many restaurants all over the world which are running by the franchisee

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www.fetsystem.com [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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