Revision for A-level Business studies 1.2

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


Fishing, Mining

Farming, Forestry


Secondary sector

Secondary sector converts the primary goods into manufactured goods

The secondary sector of the economy manufactures finished goods.



Textile production



Tertiary sector

Tertiary sector is the service industry.

This sector makes the lives of people much easier by providing services



Hair cutting



Private sector

The sector controlled and run by private individuals and organizations


Public sector

The controlled and run by the government


Types of business organisations

Sole trader


Limited companies


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)



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 don’t have to sell their personal assets to repay creditors



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


Mc Donald’s has many restaurants all over the world which are running by the franchisee


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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