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    Organization Type

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    Hossain Adnan

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    Organization Type

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    Hossain Adnan
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    8. Organization Type

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    4 views27 pages

    Organization Type

    Uploaded by

    Hossain Adnan

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    © All Rights Reserved
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    of 27

    ME 4229

    Industrial Management and Professional Ethics

    Types of Organization

    Fahim Islam Anik


    lecturer
    Department of Mechanical Engineering
    Khulna University of Engineering & Technology, Khulna-9203
    TYPES OF ORGANIZATIONS
     Types of Organizations
     Sole Trader/Proprietors
     Partnerships
     Companies/Corporations
     Cooperative

     Classifications of Business
     Private and Public sectors
     Profit-based and non-profit based
    THE SOLE TRADER/PROPRIETOR
     This is the most common form of business organization.

     One person provides the finances and in return, has full control of the
    business and can keep all the profits.

     A sole proprietorship also known as a sole trader or simply


    proprietorship is a type of business entity which is owned and run by one
    individual and where there is no legal distinction between the owner and
    the business.

     All profits and all losses accrue to the owner.


    THE SOLE TRADER/PROPRIETOR
     Allassets of the business are owned by the proprietor and all debts of
    the business are their debts and they must pay them from their
    personal resources.
     This means that the owner has unlimited liability.
     Itis a "sole" proprietorship in the sense that the owner has no partners
    (partnership).
    A sole proprietor may do business with a trade name other than his or
    her legal name.
     This also allows the proprietor to open a business account with
    banking institutions.
    THE SOLE TRADER/PROPRIETOR ADVANTAGES
     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 and


    customers.
     The business can be based on the interest and skills of the
    owner.
    THE SOLE TRADER/PROPRIETOR DISADVANTAGES

     Unlimited liability – all the owner’s assets are potentially at risk.


     Often faces intense competition from bigger firms, for example, food
    retailing.
     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.
    PARTNERSHIPS
     Partnershipsare 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.

    A partnership is a type of business entity in which partners


    (owners) share with each other the profits or losses of the business.
    PARTNERSHIP ADVANTAGES
     Partners may specialize in different areas of business management.
     Shared decision making.

     Additional capital injected by each partner.

     Business losses shared between the partners.

     Greater privacy and fewer legal formalities that corporate


    Organizations (companies).
    PARTNERSHIP DISADVANTAGES
     Unlimited Liability for all partners.
     Profits are shared.

     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.
     All partners are bound by the decision of any one of them.

     Not possible to raise capital from selling shares.

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


    LIMITED COMPANY
    3Differences between limited companies and sole traders and
    partnerships (self Study).

     Limited companies have:


     Limited Liability
     Legal Personality
     Continuity
    LIMITED COMPANY
     What is limited liability?
     Financial protection in the event that the company fails. The financial liability is limited.
     Sole Traders and Partnerships are financially responsible for all claims against the
    company.

     What is legal personality?


     A company is its own entity having an identify separate of that of its owners.
     “It is its own person” so to speak in the eyes of the law.

     What is continuity?
     The company will continue to exist in the event of the death of its owners.
     A sole trader or partnership is automatically dissolved.
    LIMITED COMPANY
     Who owns a limited company?
     Shareholders
    The Company issues shares. Each share is a small ownership in the
    company.

     What is a Private Limited Company (Ltd.)?


     It is a company – has issued shares.
     Its shares are not available for sale to the public.

     What is a Public Limited Company (Plc.)?


     It is a company – has issued shares.
     Its shares are available for sale to the general public. Its share price
    is quoted on the stock exchange.
     A board of directors control the management of the company
    appointed at an annual meeting.
    PRIVATE LIMITED COMPANIES
     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.
    PRIVATE LIMITED COMPANIES 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.


    PRIVATE LIMITED COMPANIES DISADVANTAGES
     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.


    PUBLIC LIMITED COMPANY ADVANTAGES
     Huge amounts of money can be raised from the sale of shares to the public.

     Production costs may be lower as firms gain economies scale.

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

     It becomes easier to raise finance as financial institutions are more willing to


    lend to plcs.
    PUBLIC LIMITED COMPANY DISADVANTAGES
     Setting up costs can be very expensive.
     Since anyone can buy shares, it’s possible for an outside interest to take control of
    the company.
     All company accounts can be inspected by member of the public.

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

     The way they operate is controlled by various company acts which aim 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.
    PUBLIC SECTOR ORGANIZATIONS
     The Public Sector is made up or organizations 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.
    PUBLIC CORPORATIONS

     Public corporations are owned and controlled by the government.


     Profit is not their main goal.

     They are meant to serve or meet the needs of citizens.


    PUBLIC CORPORATIONS ADVANTAGES

     Managed with social objectives rather than profit


     Loss-making services might be kept operating if the social benefit is
    great
     Finance raised mainly from the government
    PUBLIC CORPORATIONS DISADVANTAGES
     Tendency towards inefficiency because no profit targets.
     Subsidies from government can encourage inefficiencies.

     Government may interfere in business decisions for political


    reasons.
    NON-PROFITS NON-GOVERNMENTAL ORGANIZATIONS (NGOS)
     Non-Governmental Organizations (NGOs)
     Charities
     Pressure Groups
     Social Enterprise
    NON-PROFITS NON-GOVERNMENTAL ORGANIZATIONS (NGOS)
     Charity
     Profit is not the objective
     Money raised is used to support or bring attention to cause

     Pressure Group
     Pressure groups are charities
     Their goal is to change behaviors in: Citizens, Business, and Governments;

     Social Enterprise
     A company with an objective to reinvest or use profits to benefit society.
     Triple bottom line:
     Economic: Make a profit to reinvest
     Social: Provide job support for community

     Environmental: Manage business in a sustainable way


    COOPERATIVE
     A cooperative often referred to as a co-op or coop) is defined by the
    International Co-operative Alliance’s Statement on the Co-operative Identity as
    an autonomous association of persons united voluntarily to meet their
    common economic, social, and cultural needs and aspirations through a
    jointly-owned and democratically-controlled enterprise.

     It is a business organization owned and operated by a group of individuals for their


    mutual benefit.
    COOPERATIVE
    A cooperative may also be defined as a business owned
    and controlled equally by the people who use its
    services or who work at it.
     Cooperative enterprises are the focus of study in the field of
    cooperative economics.
    Segment 2:
    Own the stage and Summarize
    THANK YOU

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