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OLevel

Business Studies - 7115

Types of Business Organisation

Paper 1 & 2

Types of Business Organisation

Sole Traders, Partnerships,

Private and Public Limited Companies,

Franchises and Joint Ventures


Whenever we study the forms of business organization, it comes in our knowledge that there are mainly a few forms of government in the private sector. The names of these forms are given below:

Sole Traders

The most common form of doing business in the private sector is the sole trader i.e. mainly owned by a single person who is the sole proprietor of the business. The main reason behind the acceptance of this form of business in business persons that it is easy to establish the business as a sole trader. There are just a few formalities to register that business. 
The registration in the tax office of the government with the accounts statement. It is also required to register the name of the business as well. In some industries, they have to observe the law to run their business operations like health and safety laws while sometimes they have to obtain a license to work like to drive a taxi, etc.    

Partnership

The partnership is a form of doing business in which there are at least two partners who agree to run and manage a business together. In many countries, there is a limit of a maximum of 20 partners to run a business. They contribute to the capital of a business which is initially required to run the business. They will take a share in the profit when it will start.  

It is a common trend that partnership deed is signed between the partners which contain different clauses regarding the responsibilities and duties of the partners. Though it is not a legal obligation of having a partnership deed between partners, it is highly recommended.   

Private Limited Companies

A private limited company is different in nature from a sole trader or partnership business as it has legal existence which is separate from the owners. It proves the concept that business and businessmen are two different entities. The company operations continue even in case of the death of a one from the owner’s. The accounts of the company are taken separately from the owners’ accounts. The company can come in legal contracts or agreements which is not possible in the sole trader or partnership business. The private limited company comes under the category of an incorporated business.

Public Limited Companies

It is also a popular form of doing business as many large companies work as a public limited company. With this status, these companies become able to generate capital to expand nationally or sometimes even internationally. Most of the student considers that only those companies that are owned by the government and also managed by government officials, come in the category of public limited companies. It is not true. These are government-owned companies but managed by private individuals.

Franchise

The franchise is a form of business in which franchiser companies allow franchisees to sell their products or services instead of selling by themselves directly. McDonald's is a great example of it. In the whole world, McDonalds Franchisees are appointed to sell various products. 

Joint Ventures

A joint venture is a form of business in which two or more businesses jointly start a new business. They share capital, profit, and risk. They also share technology as well.   

Concepts of Risk, Ownership

and Limited Liability 


Sole Trader

Sole trader owns the whole risk and responsibility of the business. Whole liability is on the sole trader.

Partnership

There are several partners who own the risk and liability of the business. Whole liability is on all the partners jointly. 

Private Limited Company

There are many shareholders in the private limited company who owns the risk which is limited and up to their original investment. The number of shareholders may be few or maybe many but shares could not be sold in the public. 

Public Limited Company

There are few or many shareholders who own the company but they take risks up to their original investment. Shares are sold in public as well.

Differences Between Unincorporated Businesses

and Limited Companies 


The main difference between the unincorporated business and the limited companies is that unincorporated in an unincorporated business, a sole trader or a partnership business holds complete liability by the owners while limited companies can sell their shares and the liability is up to the original shares only. Incase if the limited companies are public limited, they can float shares in the market where the general public can buy and sell their shares.  

Business Organizations in the Public Sector

There is always great importance given to the public sector in all mixed economies. Basically it is a term used for all the businesses owned by the state like hospitals, schools and all of the government departments. 

Public corporations are the corporations owned by the government but they don’t operate it as a business. We can have an example of railway systems as governments appoint a board of directors that consist of professionals who run the railway operations and try their best to make it profitable and comfortable for the public. The board of directors is given the guidelines from the government which they follow while operating the businesses.

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