Forms of Business Organisations
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There are 5 main forms of business organization in the private sector. They are:
1. Sole Trader.
2. Partnerships.
3. Private Limited Companies (L.T.D.).
4. Public Limited Companies (P.L.C.).
5. Co-operatives.
SOLE TRADER. A business owned and operated by just one person. It is easy to set up and there are only a small number of legal regulations.
LEGAL REGULATIONS THAT MUST BE FOLLOWED. Owner must register with the tax office. The business must have a name. It must obey all the legal regulations (Laws)
ADVANTAGES.
1. Few legal regulations.
2. Owner has control of the business.
3. He keeps all the profits.
4. He keeps his business private.
DISADVANTAGES.
1. Unlimited Liabilities.
2. Because the owner is by himself he has nobody to discuss business matters with.
1. He is limited to where he can get his finance, because nobody likes to give money to sole traders.
2. When he dies the business finishes.
3. He may spend lots of time working.
PARTNERSHIPS.
A group of between 2-20 people who agree to own and run a business together.
ADVANTAGES.
1. More capital than a sole trader.
2. You share responsibility to run a business.
3. You share the risk (losses and costs)
DISADVANTAGES.
1. Unlimited liabilities.
2. You share the profits.
3. Businesses doesn't have a separate legal identity (Un-Cooperated business)
4. It is easy to have disagreements with your partners.
5. If your partners are dishonest or lazy then you can't do anything about it.
PRIVATE LIMITED COMPANIES (L.T.D.).
Shareholders are the owners. They buy shares which represent part ownership of the company.
ADVANTAGES.
1. It is easy to separate legal entity (thing) from its owners (in co-operative businesses).
2. It can sell shares and get money for them which it can use to invest in the company.
3. Shareholders have limited liabilities.
4. The shareholders can keep control of the company.
5. It is easier to get finance. More people are willing to give you money to invest in your company.
DISADVANTAGES.
1. There is a lot of legal paperwork to do. (Ex: The articles of association and the memorandum association).
2. You can't sell shares on the stock exchange.
3. The accounts are no longer secret.
4. You have to produce accounts the way the government tells you.
PUBLIC LIMITED COMPANIES (P.L.C.).
A company which has a share capital of more than 50,000 pounds.
ADVANTAGES.
1. Limited liabilities.
2. In co-operative businesses.
3. Can raise lots of money because many people would like to invest in a PLC.
4. You can sell lots of shares.
5. Because it is a large company it gets good deals from its suppliers. (Economies of Scale)
DISADVANTAGES.
1. Lots of paperwork and legal things to do.
2. Many government regulations and controls.
3. Selling shares is expensive.
4. The original owners of the company may no longer have control of a company.
All
limited companies and PLC's have to hold an annual general meeting
(AGM) where all shareholders who want to attend can attend. The
shareholders vote for people who run the company (Ex: Directors). In a
PLC the owners (Major Shareholders) may not have control of the
company. So, the shareholders own but the directors and managers
control. This is called the divorce between ownership and control.
COOPERATIVES.
Cooperatives are a group of people who agree to work together and pool the resources. They can be different types. These are:
1. Producer cooperatives.
2. Retail cooperatives.
PRODUCERS COOPERATIVES.
These are groups of workers who design and produce products just like other companies.
RETAIL COOPERATIVES.
There aim is to provide the members with good quality goods and services at reasonable prices.
OTHER BUSINESS ORGANIZATIONS IN THE PRIVATE SECTOR.
JOINT VENTURES.
This is when 2 or more businesses decide to start a project together.
Example: They build the factory to make planes.
FRANCHISE.
It is a business with a product or a service that it appoints an agent (franchisee) to sell the public.
Example: McDonalds and Burger King.
ADVANTAGES OF A FRANCHISER.
1. Quick expansion.
2. Franchiser doesn't invest money.
3. Make large profits.
4. They don't manage it.
DISADVANTAGES OF A FRANCHISER.
1. If the franchisee does a bad job it makes your business look bad.
ADVANTAGES OF A FRANCHISEE.
1. Chance of success is high.
2. Advertising is paid by the franchiser.
3. Staff training is provided by the franchiser.
4. Easy for franchisers to get finance.
5. Decisions have been made by the franchiser regarding layout, decoration, etc.
NOTE: The franchisee contributes capital, enterprise, and management.
The franchiser contributes the idea brand name, advertising, and training.
THE PUBLIC SECTOR.
They are businesses owned by the national government, local government, and a run to provide a service or public service.
PUBLIC CORPORATION.
They are completely owned by the central government. They are the businesses which have been nationalized.
NATIONALIZED INDUSTRY.
This was a business that was owned by the private sector but is now owned by the government.
OBJECTIVES.
1. Keep prices low.
2. Provide jobs.
3. Provide a service to everyone.
ADVANTAGES.
1. Some industries (defence) are very important for the welfare of the state, so the government owns them.
2. If
it is a natural monopoly it is better that the government owns it than
the private sector because the government will use it to provide a
service but the private sector will exploit the consumers.
3. The government can step into help a business which is going to fail.
DISADVANTAGES.
1. Not as efficient as the private sector.
2. No competition, therefore no incentive to be efficient.
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by: Admin
Total views: 5190
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Date: Sat, 20 May 2006 Time: 12:00 AM
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