The document discusses the purpose and types of business organizations. It defines an organization as a social arrangement for collective goals under controlled performance. Business organizations are primarily formed to make a profit and maximize owner wealth. They allow for specialization, synergy, better performance, saving time, and sharing knowledge. The main types discussed are sole proprietorships, partnerships, and limited companies. Sole proprietorships have unlimited liability but are easy to start, while partnerships allow for group talents but have risk of conflict. Limited companies provide limited liability but have higher costs and more paperwork.

1. BUSINESS
ORGANISATION
TOPIC 1 : The Purpose and Types of Business
Organisation

2. DEFINITION OF AN ORGANISATION
■ Buchanan and Huczynski (1997) defined an organisation
as “ a social arrangement for the controlled performance
of collective goals”.

3. DEFINITION OF AN ORGANISATION
■ Social arrangement –The organization is made up of
individuals in an agreement to meet their collective goals.
■ Controlled performance –It has a system to ensure that
it meets the performance standards of its objectives.
■ Collective goals –The existence of the organisation is to
meet the collective goals of an individuals in it.

4. DEFINITION OF AN ORGANISATION
Business organisation primary purpose :-
■ Make a profit
■ Maximum the wealth of the owners

5. Purpose of Business Organisation
■ People need to work together to accomplish goals.
■ Goals are too large, too complex, too expensive to be
achieved without cooperation.
■ By working together, people can produce more & better
goods and services.

6. Why Are Organisation Formed?
■ Specialisation -individuals are divided based on what they
do best and required to specialize. As they specialize, they
become more familiar with the jobs
■ Synergy -specialisation can complement each other,
combined output will exceed the sum of their individual efforts
■ Better Performance –specialisation and synergy leading to
works get done more efficiently and effectively

7. Why Are Organisation Formed?
■ Saves Time –tasks can be completed quicker rather than working
alone
■ Benefits from a Knowledge Pool –knowledge and expertise can
be shared

8. TYPES OF BUSINESS
ORGANISATION

9. Sole Proprietorship
■ ‘A sole proprietorship is a form of legal organization in which the
owner maintains sole and complete control over the business
and is personally liable for business debts’.
■ Unlimited liability of proprietor.
■ The person who contributes capital and manages the business is
called as sole proprietor.

10. Advantages and Disadvantages of
Sole Proprietorship
Advantages:
■ Low start-up costs.
■ Freedom from most regulations.
■ Owner has direct control.
■ All profits go to owner.
■ Easy to exit business.
■ Hence efforts and rewards are directly
related.
■ Owner’s interest and care directly
affects the profit of the business.
Disadvantages:
■ Unlimited liability – Owner is entirely
responsible for all the liabilities.
■ Death or illness endangers business
■ Total responsibility
■ More difficult to raise finance for
business
■ Growth limited to personal energies
■ Personal affairs easily mixed or
confused

11. Partnership
A partnership is a form of legal organization in which two or
more business owners share the management, profit
and risk of the business.

12. Advantages and Disadvantages of
Partnership
Advantages:
■ Ease of formation
■ Group talent
■ Wide resources
■ Easier access to finance
■ Sharing of Risk
■ No corporate income tax
Disadvantages:
■ Unlimited personal liability
■ Divided authority and decisions
■ Potential for conflict
■ Continuity of transfer of
ownership.
■ Lack of harmony
■ Difficult to get rid of bad partner
■ Death, withdrawal, or bankruptcy of
one partner

13. Limited Companies
■ An association of many persons who contribute money / wealth to a stock /shares
and also shares the profit and loss.
■ A limited company (LC) is a general term for a type of business organization wherein
owners' assets and income are separate and distinct from the company's assets and
income; known as limited liability.
Types of Limited Companies :
■ Private Limited companies
■ Public Limited companies

14. Advantages of Limited Companies
■ Limited liability
The owners of a business are responsible for losses only up to the amount they invest.
■ Ability to raise more money for investment
To raise money, a corporation sells OWNERSHIP(STOCK) to anyone interested.
■ Size
Because companies can raise large amounts of money, they can build modern facilities.
They can also hire experts in all areas of operation.
They can buy other corporations in other fields to diversify their risk.
■ Perpetual life
The death of one or more owners does not terminate the corporation

15. Disadvantages of Limited Companies
■ INITIAL COST
Incorporation may cost thousands of dollars and involve lawyers and accountants.
■ DOUBLE TAXATION: Company income is taxed twice.
– The CORPORATION PAYS TAX on income before it can distribute any
dividends to stockholders.
– The STOCKHOLDERS PAY TAX on the income they receive from the
corporation.
■ DIFFICULTY OF TERMINATION:
A corporation is relatively difficult to end
■ EXTENSIVE PAPERWORK
A company must keep detailed records.

16. THANK YOU