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Business Ownership: Introduction

This resource is designed specifically for Unit 5 of the Edexcel BTEC National qualification, 'Business Enterprise'.

Aim:

The aim of this resource is to develop your understanding of the ownership of business organisations. By the end, you should be able to:

• Identify the main sources of finance for private sector firms
• State the basic legal responsibilities of private sector firms
• Understand the meaning of limited liability
• Discuss how the main types of business organisation are set up

Resources:

• PowerPoint Presentation - Business Ownership [58 KB]

Activity:

Britain's building societies always used to be mutually-owned companies. They were set up to look after their members. Then, as nowadays, people could only afford to buy their own house or flat if they borrowed most of the money from a building society or bank. Building societies were owned by their members, not by shareholders. Rather than receive dividends, members were able to gain from cheaper borrowing. All this changed during the 1990s, when many of the largest building societies became public limited companies (plcs). They did this in order to raise more finance to fund new business activities.

So societies like the Abbey National and Halifax changed into plcs; a process that is known as 'de-mutualisation'. This became very popular with the general public. Why? Because when a building society 'de-mutualised', large 'windfall' payments were given to people holding accounts with the society. These windfalls were usually in the form of shares and could be held on to or sold, often for large profits. But people receiving windfalls gave up their control over the business once they cashed in their shares. They no longer were members and a long tradition of affordable funding for home buyers all but disappeared.

Image: The Skipton Building Society - Skipton are among a decreasing number of building societies dedicated to mutuality and run for the benefit of their members.

Another well-known firm that de-mutualised was the Automobile Association (AA). The AA is now a part of the Centrica group of companies, who also own British Gas and other services companies. The AA's conversion to plc status enabled the business to expand into new markets. For example, in July 2001 the AA announced the purchase for £5.75 million of the Halfords car repair business from its previous owners, Boots the Chemists. This illustrates well how the interests of a public limited company differ from those of a mutual company.