Types of Business Organisation Private Sector - owned and controlled by private individuals

Private Sector Sole Trader This type of business is owned and run by one person. The owner may employ a number of employees. Individual become sole traders because it is straightforward to set up the organisation; any profit, after tax, is kept by the owner; the owner is in complete control; the owner has flexibility to choose the hours of work; a personal service can be offered; they may be entitled to government support.

Individual become sole traders because

it is straightforward to set up the organisation;

any profit, after tax, is kept by the owner;

the owner is in complete control;

the owner has flexibility to choose the hours of work;

a personal service can be offered;

they may be entitled to government support.

Private Sector Problems which may occur include unlimited liability; loans may be expensive due to lack of security; decision making without specialisation; may be long hours of work; illness;

Problems which may occur include

unlimited liability;

loans may be expensive due to lack of security;

decision making without specialisation;

may be long hours of work;

illness;

Private Sector Partnerships Partnerships have more than one owner. The owners share the responsibility for running the business, and also the profits. Usually between 2 and 20 partners.

Advantages of Partnerships each partner can specialise; more finance can be raised; the workload can be shared. Disadvantages of Partnerships unlimited liability; profits need to be shared amongst all owners; Partners may disagree; size is limited to 20 partners; partnership ends when one of the partners dies.

Advantages of Partnerships

each partner can specialise;

more finance can be raised;

the workload can be shared.

Disadvantages of Partnerships

unlimited liability;

profits need to be shared amongst all owners;

Partners may disagree;

size is limited to 20 partners;

partnership ends when one of the partners dies.

Private Sector Limited Companies Owned and run by shareholders. Requires a Memorandum of Association (which includes name of company, address,objectives, type of activities, amount of capital to be raised, number of shares to be issued). Requires an Articles of Association (which includes the rights of shareholders, procedures for appointing directors, timing and frequency of company meetings, arrangements for auditing company accounts). Shareholders have a right to attend the AGM.

Owned and run by shareholders.

Requires a Memorandum of Association (which includes name of company, address,objectives, type of activities, amount of capital to be raised, number of shares to be issued).

Requires an Articles of Association (which includes the rights of shareholders, procedures for appointing directors, timing and frequency of company meetings, arrangements for auditing company accounts).

Shareholders have a right to attend the AGM.

Private Sector Private Limited Companies Tend to be smaller and the business name ends in Limited or Ltd. Shares can only be transferred privately, and all shareholders must agree to the transfer. They cannot be advertised for general sale. Advantages limited liability; more capital can be raised; control is not lost to outsiders; shares can be transferred if an owner dies.

limited liability;

more capital can be raised;

control is not lost to outsiders;

shares can be transferred if an owner dies.

Disadvantages profits need to be shared amongst a larger number of people; legal procedures (time and cost); restrictions on the amount of capital which can be raised; if someone decides to sell shares it may take some time to find a buyer.

profits need to be shared amongst a larger number of people;

legal procedures (time and cost);

restrictions on the amount of capital which can be raised;

if someone decides to sell shares it may take some time to find a buyer.

Private Sector Public Limited Companies This companies name ends PLC. There are around 500,000 companies in the UK but only 3% of them are public limited companies. Shares can be bought and sold on the stock market. Accounts must be published. Advantages limited liability; huge amounts of capital can be raised; economies of scale; domination of the market.

limited liability;

huge amounts of capital can be raised;

economies of scale;

domination of the market.

Disadvantages setting up costs can be very expensive; an outsider can take over the company; competitors can take advantage of information in published accounts; Legislation control the way the organisation is operated; Companies may be inflexible due to their size.

setting up costs can be very expensive;

an outsider can take over the company;

competitors can take advantage of information in published accounts;

Legislation control the way the organisation is operated;

Companies may be inflexible due to their size.