The document outlines five main forms of business organization in the private sector: sole traders, partnerships, private limited companies, public limited companies, and co-operatives. Each type has its own advantages and disadvantages, such as the ease of starting a sole trader business versus the limited liability and potential for raising capital in public limited companies. Additionally, joint ventures and franchises are explained, highlighting the shared risks and benefits of collaboration in business.

1. FORMS OF
FORMS OF
BUSINESS
BUSINESS
ORGANISATION
ORGANISATION

2. Business Organisation
Business Organisation
 There are five main forms of business
organisation in the private sector . There are :
1. Sole Trader
2. Partnership
3. Private limited companies
4. Public limited companies
5. Co-operatives

3. Sole Traders
Sole Traders
A business owned and operated
by one person.
The owner is responsible for all
operations of the business and
assumes all the risk.

4. Legal Requirements
Legal Requirements
 The owner must register with and send
annual accounts to the government Tax
Office.
 They must register their business
names with the Registrar of Business
Names.
 They must obey all basic laws for
trading and commerce.

5. Advantages of a Sole Traders
Advantages of a Sole Traders
 Owner makes all decisions
 Owner is her or her own boss
 Owner keeps all the profits
 All financial informatio can be kept
secret
 This type of business is easy to start or
close

6. Disadvantages of a Sole Traders
Disadvantages of a Sole Traders
 Owner has responsibility for all debts
 Costs and time commitment can be high
 Funding can be difficult to obtain
 Owner is responsible for all aspects of
the business
 Owner doesn’t have fringe benefits

7. Partnership
Partnership
a form of business organization
in which two or more people
own and operate the business
together

8. Recommended to people who:
Recommended to people who:
 Want to make a bigger business but
does not want legal complications.
 Professionals, such as doctors or
lawyers, cannot form a company, and
can only form a partnership.
 Family, when they want a simple means
of getting everybody into a business

9. Advantages of a partnership
Advantages of a partnership
 Partners co-own the business
 They share responsibilities
 They may have greater financial
resources than sole proprietors
 They share business losses
 They share time commitment

10. Disadvantages of a Partnership
Disadvantages of a Partnership
 Partners have unlimited personal liability
for all the other partners
 They may have conflicts
 Profits are shared
 Partnerships are more difficult to close
down than sole proprietorships
 Agents of the business dillemma

11. Private Limited Companies
Private Limited Companies
 Private Limited Companies have separate
legal identities to their owners, and thus their
owners have limited liability. The company has
continuity, and can sell shares to friends or
family, although with the consent of all
shareholders. This business can now make
legal contracts. Abbreviated as Ltd (UK), or
Proprietary Limited, (Pty) Ltd.
Consent-Permission for something to happen or
agreement to do something

12. Advantage of Private Limited Companies
Advantage of Private Limited Companies
 The sale of shares make raising finance a
lot easier.
 Shareholders have limited liability, therefore
it is safer for people to invest but creditors
must be cautious because if the business
fails they will not get their money back.
 Original owners are still able to keep
control of the business by restricting share
distribution.

13. Disadvantage of Private Limited Companies
Disadvantage of Private Limited Companies
 Owners need to deal with many legal
formalities before forming a private
limited company:
 # The Articles of Association: This
contains the rules on how the company
will be managed. It states the rights and
duties of directors, the rules on the
election of directors and holding an official
meeting, as well as the issuing of shares.

14. Disadvantage of Private Limited Companies
Disadvantage of Private Limited Companies
 # The Memorandum of Association: This
contains very important information about the
company and directors. The official name
and addresses of the registered offices of the
company must be stated. The objectives of
the company must be given and also the
amount of share capital the owners intend to
raise. The number of shares to be bought b
each of the directors must also be made
clear.

15. Disadvantage of Private Limited Companies
Disadvantage of Private Limited Companies
 # Certificate of Incorporation: the document
issued by the Registrar of Companies that will allow
the Company to start trading.
 Shares cannot be freely sold without the consent
of all shareholders.
 The accounts of the company are less secret than
that of sole traders and partnerships. Public
information must be provided to the Registrar of
Companies.
 Capital is still limited as the company cannot sell
shares to the public.

16. Public Limited Companies
Public Limited Companies
 Public limited companies are similar to private limited
companies, but they are able to sell shares to the public. A
private limited company can be converted into a public
limited company by:
 # A statement in the Memorandum of Association must be
made so that it says this company is a public limited
company.
 # All accounts must be made public.
 The company has to apply for a listing in the Stock
Exchange.
 A prospectus must be issued to advertise to customers to
buy shares, and it has to state how the capital raised from
shares will be spent.

17. Advantages of Public Limited Companies
Advantages of Public Limited Companies
 Limited liability.
 Continuity.
 Potential to raise limitless capital.
 No restrictions on transfer of shares.
 High status will attract investors and
customers.

18. Disadvantages of Public Limited Companies
Disadvantages of Public Limited Companies
 Many legal formalities required to form the
business.
 Many rules and regulations to protect
shareholders, including the publishing of annual
accounts.
 Selling shares is expensive, because of the
commission paid to banks to aid in selling
shares and costs of printing the prospectus.
 Difficult to control since it is so large.
 Owners lose control, when the original owners
hold less than 51% of shares.

19. Co-operative
Co-operative
 Businesses owned and operated by a
group of people with a strong common
interest
 Start-up costs are shared among the
members of the co-operative
 Members own and control the business
and make all business decisions

20. Disadvantages of a co-operative
Disadvantages of a co-operative
 Because each member only has one
vote, members may not want to invest
money for expansion
 Because of the number of members,
making decisions can be difficult
 Members can have conflicts

21. Joint ventures
Joint ventures
Two businesses agree to start a
new project together, sharing
capital, risks and profits.

22. Advantages of Joint ventures
Advantages of Joint ventures
 Shared costs are good for tackling
expensive projects. (e.g aircraft)
 Pooled knowledge. (e.g foreign and
local business)
 Risks are shared.

23. Disadvantages of Joint ventures
Disadvantages of Joint ventures
 Profits have to be shared.
 Disagreements might occur.
 The two partners might run the joint
venture differently.

24. Franchise
Franchise
A business in which a franchisor
sells to another person, called
the franchisee, the rights to use
the business name and to sell a
product or service in a given
territory

25. Advantages of a franchise
Advantages of a franchise
 Franchisees buy a business with a good
reputation
 Franchisors supply training and financial
knowledge
 Franchisors usually provide packaging,
advertising, and equipment to the
franchisee

26. Disadvantages of a Franchise
Disadvantages of a Franchise
 Franchises can be expensive to buy
 Franchisees may have to follow a lot of
rules laid down by the franchisors
 If a franchisor’s business fails, so will
the franchisee’s business