MIXED ECONOMYMIXED ECONOMY

A market economy primarily A market economy primarily basedbased on private enterpriseon private enterprise

where the where the government, government, however, playshowever, plays an important an important role in regulating the system role in regulating the system as a whole by its choices of as a whole by its choices of

economic policy and by economic policy and by providing some essential providing some essential

services.services.

Although private sector firms Although private sector firms predominate, both private and predominate, both private and

public enterprises are public enterprises are important for the economic important for the economic

and social development of the and social development of the country.country.

The most important types of The most important types of private business units in the private business units in the

United Kingdom are:United Kingdom are:

sole proprietors sole proprietors or or

sole tradersole trader

partnershipspartnerships

limited companieslimited companies

cooperative societiescooperative societies

A sole proprietorA sole proprietor -or sole trader- -or sole trader-

is a person who is a person who owns and owns and runsruns a business for himself a business for himself

This type of business This type of business organization still represents organization still represents a large number of concerns a large number of concerns in farming and retail trade.in farming and retail trade.

It has the following main It has the following main characteristics:characteristics:

• a single person -the sole a single person -the sole proprietor – owns the proprietor – owns the

business and therefore business and therefore bears all the risks and any bears all the risks and any

losses;losses;

• he also receives he also receives all the all the profitsprofits;;

• he provides he provides all the financeall the finance which forms the capital of which forms the capital of

the business;the business;

• he has he has full controlfull control of the of the enterpriseenterprise

Businesses of this kind are Businesses of this kind are often rather often rather small at the small at the

startstart, but many , but many subsequently develop into subsequently develop into

big firms.big firms.

A partnershipA partnership

is an association of is an association of individuals engaged in individuals engaged in

business.business.

The minimum number of The minimum number of people is obviously two, and people is obviously two, and

the maximum number is the maximum number is generally limited to twenty.generally limited to twenty.

Compared to sole traders: Compared to sole traders:

ADVANTAGESADVANTAGES

More owners can provide more More owners can provide more financefinance

risks are shared among partnersrisks are shared among partners

DISADVANTAGESDISADVANTAGES

profits are shared among partnersprofits are shared among partners

no single partner has full control or no single partner has full control or policy-making powerspolicy-making powers

When a partnership is When a partnership is formed, a document called formed, a document called a a partnershippartnership agreementagreement – –

or articles of partnership – is or articles of partnership – is normally drawn up.normally drawn up.

It contains all the necessary It contains all the necessary information about the information about the

partnership.partnership.

for example:for example:

The name and address of the The name and address of the businessbusiness

The names and addresses of the The names and addresses of the partnerspartners

The quantity of capital which each The quantity of capital which each partner is to providepartner is to provide

The way in which profits and losses The way in which profits and losses will be sharedwill be shared

Two types of partnership can Two types of partnership can be distinguished:be distinguished:

ordinary (or general) partnershipordinary (or general) partnership

limited partnershiplimited partnership

An ordinary partnershipAn ordinary partnership

Is one in which all partners have Is one in which all partners have unlimitedunlimited liabilityliability and a creditor may and a creditor may seize their personal property to seize their personal property to obtain payment of debts the obtain payment of debts the partnership owes himpartnership owes him

In a limited partnershipIn a limited partnership

On the contrary, along with one or On the contrary, along with one or more more general partnersgeneral partners there are one there are one or more or more limited partnerslimited partners..

General partnerGeneral partner

has unlimited liability has unlimited liability (as explained (as explained above)above)

Limited partnerLimited partner

is only liable for the is only liable for the partnership’s debts partnership’s debts up to the value of up to the value of the money they the money they have put into the have put into the businessbusiness

Limited companiesLimited companies

Is a business enterprise that Is a business enterprise that has a separate legal has a separate legal

existence apart from its existence apart from its shareholdersshareholders..

Shareholders Shareholders the investors who have the investors who have

bought shares in the bought shares in the company and are its ownerscompany and are its owners

Other important features of a Other important features of a companycompany

Shareholders control the business on Shareholders control the business on a majority vote basis;a majority vote basis;

They elect the directors, who are They elect the directors, who are responsible for the day-to-day responsible for the day-to-day running of the company;running of the company;

Profits are distributed as dividends Profits are distributed as dividends on the basis of the shares held;on the basis of the shares held;

Shareholders have limited liabilityShareholders have limited liability

Cooperative societiesCooperative societies

Are non-profit making Are non-profit making associations of persons, who associations of persons, who are at the same time both are at the same time both

members and customers of members and customers of the cooperativethe cooperative

And whose aim is to And whose aim is to economize by producing, economize by producing, buying or selling goods in buying or selling goods in

common, returning the common, returning the profits to members.profits to members.

Cooperatives are not confined Cooperatives are not confined to retail trade, they also to retail trade, they also

cooperate in:cooperate in: Wholesale tradeWholesale trade ManufacturingManufacturing FarmingFarming Provision of direct servicesProvision of direct services