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by: Admin
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Date: Sat, 5 Aug 2006 Time: 12:00 AM
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Types of business organisation - Private Sector
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Private sector ? business set up by individuals or groups of
individuals
Unincorporated business
- No legal difference between
owners and the business
Incorporated business
- Business has a separate legal identity
from its owners
- Business can be sued, taken
over, or liquidated
Sole Trader/Proprietor ? unincorporated
- Owned by just one person
Advantage
- Few legal restrictions
- Profit kept by owner
- Owner is in complete control
- Flexibility ? for owner and
customer
- Small size, personal service to
customers
- Government support
Disadvantages
- Unlimited liability
- Capital from own savings
- Illness means a loss of income
- Can be sued
- Business ceases if owner looses
interest or dies
Partnership ? unincorporated
- More than one owner
Advantages
- No legal formalities
- Each partner can specialize
- More finance
- Share workload
- Pool of ideas and opinions
- Larger, therefore more ability
to raise funds
Disadvantages
- Unlimited liability
- Shared profits
- Disagreements
- Size limited to 20 persons,
limited capital
- Death = dissolve
- One person decides, legally
binding on others
- Sued
Limited Partnership (sleeping partner)
- One partner provides capital,
but takes no part in management
- Has limited liability
- More than 20 partners
- At least one partner must be
liable
Limited Companies
- Separate legal identity from
owners
- Limited liability
- Minimum of 2 members, no
maximum
- Capital divided into shares
- Directors and chairperson
chosen by shareholders
Private Limited Company
- Shares can be transferred privately
- Chares cannot be advertised for
sale
Advantages
- Limited liability
- More capital raised ? no limit
on the number of share holders
- Control of company cannot be
lost to outsiders
- Death means continuation of
firm, as shares are transferred
Disadvantage
- Profit shared among larger
number of members
- Legal procedures
- No public sale of shares, less
capital can be raised
- Public financial information,
competitors can use it
- Takes time to find buyers for
shares
Public Limited Companies
- Shares sold and bought on the
stock exchange
Advantages
- Limited liability
- Huge amounts of money can be
raises
- Economies of scale
- Easier to raise finance from
financial institutions
Disadvantages
- Setting up cost high
- Outside interests can take over
- Public accounts means competitors
can use it to their advantage
- Divorce of ownership and
control, owner?s loose interest
- Inflexible due to size
Holding companies
- Have shares in other public
limited companies to exert control
Advantages
- Diverse range of business
activity
- When one fails, have others to
rely on
- Size, therefore financial
economies of scale
Disadvantages
- Holding company may only see
the business as a financial asset
- No interest in the business or
its development
Co-operative
- Voluntary and open membership
- Democratic ownership
- Dividend according to spending
- Education facilities for
members and workers
- Regional organizations
Charities
- Raise money for good causes
- Rely on donations
- No tax paid
- Businesses get tax refund by
giving money to charities
About the Author
by: Admin
Total views: 691
Word Count: 1806
Date: Sat, 5 Aug 2006 Time: 12:00 AM
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