1.2 Types of Organisations
1.2 Types of Organisations
Break down of the private sector (For profit commercial organizations)
usually found among professionals, e.g., accountants, doctors, painters etc. and small businesses.
additional capital injected by each partner
business losses shared between partners
a form of business organization owns by two or more persons (usually up to a maximum of 20 in many countries).
a business organization with a separate legal entity. It is a legal person (entity) separate from its owners (shareholders)
The company can own assets, make contracts, sue and be sued on its own name. For example, it can commit crime, such as fraud and be fined.
Shareholders have limited liability. The owners or shareholders can only lose money they have invested in the business
Advantages of private limited company
separate legal personality
greater status than an unincorporated business
shareholders have limited liability
Disadvantages private limited company
legal formalities involved in establishing the business
quite difficult for shareholders to sell shares
capital cannot be raised by sale of shares to the general public
Disadvantages of public limited company
risk of takeover
share prices subject to fluctuation
legal formalities in formation
Advantages of public limited companies
separate legal identity
A sole trader is an one owner business although it can employ many people. The owners reaps all the profits but assumes all risks and therefore has unlimited liability
Advantages of a sole trader
owner has to complete control
owner keeps all profits
easy to set up
able to choose times and patterns of working
Disadvantages of a sole trader
lack of continuity
often faces intense competition from bigger firms
difficult to raise additional capital
Break down of the private sector (For profit social enterprise)
Public-private partnerships (PPP)
comprises businesses owned and controlled by individuals or groups of individuals
Most for profit (business) organizations are in the private sector (e.g. sole traders) but this sector also includes many non-profit organizations, (e.g. charities)
comprises organisations accountable to and controlled by central or local government (the state
This sector also includes a few organizations involved in business activities (public corporations)
Most public sector organizations are non-profit making, providing mainly public/merit goods, such as education, health, etc. (e.g. ministries, municipalities, government services, etc.).
aim is to offer its members products at a discountred price and make some profits (not maximize) which is divided among the members
many types of cooperatives: Retail and Consumer Cooperatives
an organization owned and operated jointly by a group of individuals for their mutual benefit
Charities are a type of NGOs that focuses on pilanthrophy, i.e. their aims is to provide relief for those in need
Eg. Red Cross, Save the Children, Cancer Society etc.
Non-government organizations (NGOs)
NGOs are 'non-profit' organizations that are not run by any government but have public goals such as: raise money for good causes (charity), provide a particular service, raising public awareness on a specific issue,
Eg. PAWS, Medecins sans frontieres (Doctors without borders), Amnesty International, Greenpeace
Public-Private Partnership (PPP)
Eg. A school, a hospital, a rehabilitation center, the Channel Tunnel, Hong Kong Disneyland, London Olympic Stadium
a business created between private sector business and the government for the construction of a public service facility
Micro-financiers are organizations providing small amounts of finance to individuals who cannot have access to traditional banks for loans (low income earners, families in rural areas and women).
The interest rates are low.
Example: Grameem Bank in Bangledesh
Benefits of Privatization
offering more competitive prices for customers
less financial burden for the government to make money
reduced their costs of production in order to make profits
Privatization is the process of selling public sector organizations to the private sector (individuals)
For-profit social enterprise
A social enterprise is a form of organization that aims to improve human, social, or environmental well-being.
Although some of them can make profit, they do not want to maximize profit (i.e. not at the expense of their social aims). They include: Cooperatives, Microfinance providers, Public-private partnerships (PPP)
Floatation (IPO - Initial public offering)
The first time the company's shares are made available to the public.
process of going public, being listed on the Stock Exchange and shares are now available for sale
economic resources are owned and controlled by both private and public sectors
economic resources are owned, planned and controlled by the state
economic resources are owned largely by the private sector with very little state intervention
Non-profit social enterprise
Non-governmental organizations (NGOs). Charities, clubs and societies