Slide 1

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 2

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 3

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 4

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 5

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 6

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 7

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 8

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 9

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 10

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 11

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 12

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 13

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 14

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 15

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 16

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 17

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 18

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 19

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 20

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 21

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 22

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 23

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 24

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 25

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 26

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 27

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 28

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 29

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 30

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 31

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 32

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 33

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU


Slide 34

INTRODUCTION TO
ORGANISATIONS

K. Venkat Swamy
M.B.A., M.Com., B.Ed., (ICWAI)
[email protected]
Ph.No.009609973472
India Ph.No:00918686993227

Content
Types of Organisations

Profit non-profit and non-governmental

Sole Trader/Proprietors

Partnerships

Companies/Corporations

Charities

Cooperatives

Franchises
Private Sector and Public Sector

Learning Outcome








Analyse local organisations of different types and identify
their main features.
Explain the advantages and disadvantages of each type of
organisation identified.
Relate each type of ownership to the degree of control.
Distinguish between organisations in the Private and Public
Sectors.

READING FOCUS

Context
If you walk down any high street, you will notice that many of
the shops display their names for all to see. It may be
Robinson the butcher, Brown, Macy and Brown solicitors, as
well as known chain stores such as Marks and Spencer plc
or Hodson's Limited. All are businesses, but each with a
different status in terms of how is operated, who the
owner is and how any profit is shared.

The Private and Public Sectors of the Economy










The Private Sector comprises businesses owned and controlled by
individuals or groups of individuals. In every country, most
business activity is in the private sector.
The Public Sector comprises Organisations accountable to and
controlled by central or local government. These usually include:
Health and education services
Defense
Law and order
THE ECONOMY
Some strategic industries.
Private Sector

Public Sector

The Private Sector Legal Structure
Private Sector
Businesses

Sole
Trader

Partnership

Private
LTD

Limited
Companies

Cooperatives

Public
LTD

The Sole Trader/Proprietor
This is the most common form of business organisation. One person
provides the finances and in return, has full control of the
business and is able to keep all the profits.

The Sole Trader/Proprietor
Advantages











Disadvantages

Easy to set up-no legal formalities.



Owner has complete control –not
answerable to anybody else.
Owner keeps all profits.



Able to choose times and patterns of
working.
Able to establish close personal
relationships with staff (if any are
employed) and customers.
The business can be based on the
interest and skills of the owner –
rather than working as an employee
for a larger business.



Unlimited liability – all of the owner’s a
assets are potentially at risk.
Often faces intense competition from
bigger firms, for example, food
retailing.
Owner is unable to specialize in areas
of the business that are most
interesting – it is responsible for all
aspects of management.



Difficult to raise additional capital.



Long hours often necessary to make
business pay.



Lack of continuity- as the business
does not have separate legal status,
when the owner dies, the business
ends too.

Partnership

Partnerships are agreements between two or more people carry on a
business together, usually with a view of making a profit.
The Deed Of partnership establishes the rights and privileges of the
partners. This document includes issues such as voting rights,
distribution of profits, The management role of each partner and
who has the authority to sign contracts.

Partnership
Advantages


Partners may specialise in
different areas of business
management.



Shared decision making.



Additional capital injected by each
partner.





Disadvantages





There is, as with sole traders, no
continuity and the partnership will
have to be reformed in the event
of the death of one partner.



Al partners are bound by the
decision of any one of them.



Not possible to raise capital from
selling shares.

Business losses shared between
the partners.
Greater privacy and fewer legal
formalities that corporate
Organisations (companies)

Unlimited Liability for all partners.
Profits are shared.



A sole trader, taking on partners
will loose independence of
decision making.

Limited Companies
Characteristics of Limited Companies






Limited Liability
Legal personality
Continuity
Capital is divided into shares
Companies are run by directors

Question: Discuss the characteristics of a limited company and how
these differ from the Sole Trader and Partnership forms of
businesses.
Distinguish between the ownership and control of a Limited
Company.

How Limited Companies are Formed
Memorandum of Association + Article of Association

Registrar of Companies

Certificate of Incorporation

Trading Begins

The Memorandum of Association







Name of the company
Name and address of the company’s registered office
The objectives of the company and scope of its activities
The liability of members
The amount of capital to be raised and the number of shares to be
issued

Note: A limited company must have a minimum of two members.

Article of Association







The
The
The
The
The

rights of shareholders
procedure for appointing directors and scope of their powers
length of time directors should serve before reelection
timing and frequency of company meetings
arrangement for auditing company accounts

The Private Limited Companies
Characteristics











Tend to be relatively small companies.
Their business name ends in Limited or Ltd.
Shares can only be transferred privately and all shareholders must
agree to the transfer.
Private Limited Companies are often family businesses owned by
members of the family or close friends.
The directors of these companies tend to be shareholders and are
involved in the running of the business.
Many manufacturing firms are Private Limited Companies rather
than Sole Traders or Partnerships

List the names of five (5) Private Limited Companies in your
community?

Private Limited Companies
Disadvantages

Advantages








Shareholders have limited
liability.
More capital can be raised as
there are no limits on the
number of shareholders.
Control of companies cannot be
lost to outsiders.







The business will continue even
if one of the owners dies

.



Profits have to be shared out
amongst a much larger number
of members.
There is a legal procedure to set
up the business. This takes time
and costs money.
Firms are not allowed to sell
shares to the public This
restricts the amount of capital
that can be raised.
Financial information filed with
the Registrar can be inspected
by any member of the public.
Competitors could use this to
their advantage.

Formation of Public Limited Companies

Memorandum of Association + Article of Association + Statutory Declaration

Registrar of Companies

Certificate of Incorporation
Publish of Prospectus

FLOTATION

Public Limited Companies


A plc cannot begin trading until it has completed these tasks and
has received at least 25% payment for the value of shares.



It will then receive a Trading Certificate and can begin operating.



The shares will be quoted on the Stock Exchange or the
Alternative Investment Market (AIM).

The Stock Exchange is a market where second hand shares
are bought and sold. A full Stock Exchange listing means
that the company must comply with the rules and
regulations laid down by the Stock Exchange.

The Alternative Investment Market (AIM) is designed for
companies which want to avoid some of the high costs of a
full listing.

Going Public is Expensive









The company needs lawyers to ensure that the prospectus is
‘legally’ correct.
A large number of publications have to be made available.
The company must use financial institutions to process share
application.
The share has to be underwritten. A fee is paid to an
underwriter who must buy any unsold shares.



The company will have advertising and administrative expenses.



The company must have a minimum of $50,000 share capital.

Exiting the Stock Market
Sometimes a business operating as a Public Limited Company
is taken back into private ownership. Why does this
happen?

Exiting the Stock Market



Sometimes the business lose favour with the stock market.



The business may be bought outright by a private individual.



The people running the business might no longer be willing to
tolerate interference from the external shareholders.

Question: Suggest why Richard Branson decided he
wanted to buy back all the shares of his company after
going public.

Public Limited Companies
Disadvantages
Advantages








Huge amounts of money can be
raised from the sale of shares to
the public.





Setting up costs can be very
expensive.
Since anyone can buy shares, its
possible for an outside interest to take
control of the company.

Production costs may be lower as
firms gain economies scale.



All company accounts can be inspected
by member of the public.

Because of their size, plc can
often dominate the market.



Because of their size they cannot deal
with customers at a personal level.

It becomes easier to raise finance
as financial institutions are more
willing l to lend to plcs.





Questions: What are the
limitations of being a
limited company in a highly
competitive market?



The way they operate is controlled by
various company acts which aims to
protect shareholders.
There is divorce of ownership and
control which might lead to the
interest of owners being ignored to
some extent.
Plcs inflexible due to their size.

Cooperatives

This is a common form of business organisation in some countries,
especially in agriculture and retailing.
Features


All members can contribute to the running of the business,
sharing the work load, responsibilities and decision making.



All members have one vote at important meetings.



Profits are shared equally among members.

Cooperatives
Disadvantages

Advantages






Buying in bulk.
Working together to solve
problems and make decisions.
Good motivation of all
members to work hard as
they will benefit from shared
profits.







Poor management skills unless
professionals are employed.

Capital shortages because no sale
of shares to the non-member
general public is allowed.
Slow decision making if all
members are to be consulted

Research and writing in your book
Task
1.





What are charities?. How are they
different from Cooperatives in
relation to the following:
Characteristics
Role in community development.
Advantages and Disadvantages

Franchises
This is a contract between two firms. The contract allows one of
them, the franchisee, to use the name, logo and marketing
methods of the other, the franchiser.
The franchisee can separately, then decide which form of legal
structure to adopt.

YOUR READING TASK

For each of the following forms of
business identify their:





1.
2.
3.
4.

Definition
Characteristics
How they are organised
Advantages and disadvantages
Workers Cooperatives
Consumer Cooperatives
Building and Friendly Societies
Charities

Factors Affecting the choice of Organisations






Age: Many businesses change their legal status as they become
older.
The Need for finance: A change in legal status may be forced on
the business.
Size: The size of a business operation is likely to affect its legal
status.



Limited Liability: Owners can protect their own personal
financial position if the business is a Limited Liability company.



Degree of control: Owners may consider retaining control of the
business as important.



The Nature of the Business: The type of business activity may
influence the choice of legal status.

Public Sector Organisations

The Public Sector is made up or organisations which are owned and
controlled by central or local government or public corporations.
They are funded by government and in some cases from their own
trading ‘surplus’ or profit.
Public Sector businesses still have important roles to play in certain
areas of business activity.

Which Goods and Services Does the Public Sector
Provide?

Public Goods

Non- Rivalry

Consumption of the good/Service
by one individual does not reduce the
Amount available for others

Non- Excludable

It is impossible to exclude others
From benefiting from their use

Merit Goods

These are services which people thing should be provided in greater
quantities



Examples of merit goods are:
Education, Health Services, Public Libraries

If the individual is left to decide whether or not to pay for these
goods, some may choose not to, or may not be able to.

Research and Writing Task
1.





Identify five businesses within the Public Sector of your
country and discuss the their nature in terms of the
following:
Features
Role in the community
Their Inter-relationship

2. Assess the reasons for Privatisation of some Public Sector
entities.

3. What are the main arguments for and against privatisation
of such entities.

END
THANK YOU