Section 1.

2 Notes
Types of organizations:

Main types of businesses:

1.       Public Enterprises: Businesses that are managed by the government. All
decisions made by the government. Aim to achieve public welfare.
2.       Private Enterprises: Businesses that are managed and owned by private
sector or individual.

Private Enterprises:
1.       Profit-seeking enterprises: are private businesses that aim to maximize their
profit from their products (their main goal is to attain the maximum amount of
profit).
2.       Social-profit Enterprises: they dominate the social purpose over the profit
maximizing objective (they aim to develop their community and they achieve some
profit).
3.       Non-profit Enterprises: They are private businesses that aim to develop a
society with no intention for profits. They might generate surpluses after covering
their expenses, which would be also used to provide social services.

Profit-seeking enterprises:
1.       Sole Trader: is a business that is owned and managed by one person.
Advantages:
1.       He/ She is responsible for the decision making process, which means
its fast.
2.       Sole traders allow customization by modifying their product based on
customers' needs.
3.       The business registration is inexpensive and simple (easy to set up).
4.       Sole traders enjoy privacy, as they don't have to share their financial
performance.
5.       Sole traders get all the profits
 6.       They feel high sense of achievement towards their accomplishments
7.       They benefit from tax as the government provides tax incentives for
small businesses
Disadvantages:
1.       Sole traders have limited access to finance since the owner has limited
capital from his own savings.
2.       They are risking their own money and might suffer from huge losses in
case of failure.
3.       They suffer from unlimited liability and they should cover all the
business financial from personal funds.
4.       They lack continuity as the business vanishes in case of the owner's
death.
5.       They have little chances to grow and expand since their profits are
very low.

 
2.       Partnerships: are private businesses that are owned and managed by more
than one person (between 2 and 20). A partnership deed is a contract between
partners that determines what each partner’s obligations and rights are within the
business. Partners are considered active if they engage in the business
management (have unlimited liability), otherwise they are considered passive
(silent partners) as they only invest in the business (have limited liability).
Advantages:
1.  More access to finance as the business can raise funds from different
partners and banks.
2. Enjoy different and creative ideas that are shared among partners.       
3. The business tasks and duties are allocated among different partners,
which will lead to more efficient work.
4. Partnerships have higher likelihood of continuity or survival as if one
partner left, the other partners would take their share.
5. Partnerships have high privacy as they don’t have to share their financial
performance.
Disadvantages:
 1. Partnerships might suffer from disagreement that might exist among the
partners, which might lead to slowing down the decision making process.
2. They will have to share the profits among themselves.
3. Active partners suffer from unlimited liability to cover the business
financial obligations.
4. Partnerships have a lower access to finance compared to corporations,
which will limit their expansion and growth..

3.       Corporation: are private organizations that are owned by shareholders and

managed by the Chief executive officer (CEO). It's either a public limited company
or private limited company. Shareholders choose the CEO. The corporation
separates management from owners. 
Types:
1. Private limited company (LTD): are one type of corporation where the
ownership rights are given to specific people. Ex: Lego.
Advantages:
 It can control its shareholders.
 Higher access to finance.
 Enjoy privacy as they don’t have to share their
financial information
 Enjoy limited liability and are not liable for the
business financial situation.
 Enjoy continuity as the ownership can easily be
transferred. 
 There is a possibility for expansion.
 There is an organizational structure.
Disadvantages:
 Selling shares won’t guarantee that a company will
be able to raise the funds needed.
 Owners risk partial or complete loss of control over
their company.
 Takes time to set up a corporation and needs a
great deal of money for the legal requirements.
  The company has no control over the stock market,
which means that share prices may fall. This will
affect the company’s image.
2. Public limited company (PLC) or joint-stock company: are one type of
corporation where ownership rights are given to the public, which means
anyone can buy a share. Ex: New York stock exchange.
Advantages:
 Higher access to finance.
 Shareholders enjoy limited liability and are not
liable for the business financial situation.
 They enjoy continuity as the ownership can easily
be transferred. 
 There is a possibility for expansion.
 There is an organizational structure.
Disadvantages:
 Selling shares won’t guarantee that a company will
be able to raise the funds needed.
 Their financial performance isn't private.
 Owners risk partial or complete loss of control over
their company.
 Takes time to set up a corporation and needs a
great deal of money for the legal requirements.
 The company has no control over the stock market,
which means that share prices may fall. This will
affect the company’s image.

Note: When the business sells shares for the first time it is called initial public
offering (IPO). 

 Profit Social enterprises:

1.       Cooperatives: it's a form of partnership that is dominated by their social
purpose. These organizations are managed by their members and seek to achieve
the benefits of society in their local community.
Main features:
- They aim to provide services for their members within their local community.
- They have limited liability as they are forms of partnerships.
- Cooperatives members have equal voting power inside this organization.

Advantages:
- It is relatively easy to set up a cooperative.
- They are exempted from taxes since they are helping the government in
developing the community.
- The members inside the cooperatives enjoy full control all major decisions.
- Cooperative members have equal voting power.
- They enjoy financial support from the government

Disadvantages:
- Cooperatives suffer from a lack of financial resources as they are not
providing high returns.
- They don’t attract key employees and high skilled managers
(intrapreneurs) since they don’t offer high financial incentives.

- Decision making inside the cooperative may be slow as all the members
should vote on each decision.
- Decision making inside cooperatives might lead to conflicts among
members.

Types:
1. Financial cooperative: Provide financing or loans to its members
at a lower interest rate.
2. Housing cooperative: Provide housing units to their members in
exchange for monthly subscription fees.
 3. Workers' cooperative: are specialized organizations that are
operated by the worker to ensure that they are getting their rights.
4. Producer cooperative: is a representative of certain producers,
which is also run by them. It helps them solve problems such as
providing finance for a machine to be repaid in a long-term and
with low interest. 
5. Consumer cooperative: provides a service to customers that
monitor the products they get to ensure they’re paying the right
prices according to the quality. 
2.       Micro-financers: provide small or micro-loans for Small and Medium
enterprises (SMEs) that usually don’t have large access to finance.
Main Features:
 They provide long term loans at a very low interest rate.
 They extend the repayment schedule in case 
 They target new entrepreneurs with new ideas that would help in social
development.
Advantages:
- Micro financers provide financial support to young entrepreneurs.
- They help the community by providing new job opportunities inside the economy.
- They provide loans to keep economic sectors that are essential to the
communities’ development.
- The support the entrepreneurship culture in order to develop the community.

Disadvantages:
- They add an interest expense to the loans granted to the entrepreneurs, which
might be unethical.
- They provide a small amount of loan which might not be efficient for the new
standards, and this might not be sufficient for the new startups.
- New entrepreneurs are paying interest payments in addition to the other
expenses which might increase the risk of failure.
- They cannot attract key employees and highly skilled managers since they don’t
offer high financial incentives.
 3.       Public-Private Partnerships (PPP): they are private organizations that
manage a public good that is needed to achieve welfare (telecommunication).
Features:
 Established for a social aim.
 The public sector provides the funding for this project while the private
sector provides the expertise to run the business.
 The decision making process is a collaboration between the experts in
the company.
Advantages:
 A favorable legal status is achieved. Anyone can engage in doing
good for humanity.
 They have a strong sense of community as they are working
towards the same social cause.
 They benefit the stakeholder community.
Disadvantages:
 Decision making is complex and time-consuming.
 There may not be sufficient capital for growth.
 There may not be sufficient capital for financial strength as the try
to make their products as inexpensive as possible.

Non-profit enterprises:

They aim to maximize social benefits and don’t aim to maximize profits.

Advantages:

- They help to develop the community and achieve better living conditions for the
public.

- They are exempted from taxes as they are contributing and developing the
country.

- They also receive grants and subsides from the government and international
bodies.
- They have a positive impact on the community, thus they will receive public
support.

Disadvantages:

- They might be faced by strict limitations imposed by the government.

- They have limited access to finance thus their expansion possibilities are very
limited.

- They don’t attract key employees and highly skilled managers as they don’t
offer high financial incentives.

It contains 2 main subtypes:

1.       Non-governmental organizations (NGOs): They are private non-

governmental organizations that produce products (goods and services) with no
intention to develop profit. Examples of NGOs are "Universities". They might have
economic, social, or even political purposes. They might receive funding from their
members to cover needed costs.

Advantages:
- They have complete control over their organizations without government
interference.
- They provide essential goods and services for the community
development.
- They are exempted from government taxes.

Disadvantages:
- They have limited access to finance as their expansion opportunities are
limited.
- They don’t attract key employees and highly skilled managers.
2.       Charities: are private institutions that do not produce any product, but they depend
on donations to serve their social cause. Examples are "Red Cross". They help those
who can’t help themselves. They receive funding from their founders and donations
provided by individuals.

Advantages:

- They aim to provide social services thus helping developing the community.

- They are exempted from the government access.

- They receive donations from the gov. and international bodies.

Disadvantages:

- They have limited access to finance.

- They don’t attract key employees and highly skilled managers