CHAPTER 5: Business Organisation

 1. Business Organisation- Industrial enterprise and the people who constitute it.

2. Types of Business Organisation
a) Sole Proprietorship
b) Partnership
c) Limited Company
d) Co-operatives
e) Public Corporation

3. Sole Proprietorship- An enterprise that is owned by one person.




4. Advantage of Sole Proprietorship
a) It need a little capital to start up the business.
b) Sole trader can make their own decision.
c) Sole trader can set up a business alone.
d) Sole trader receives all the profits from the company.
e) No payment of corporate taxes required.
f) Secrets are keep safe.

5. Disadvantages of Sole Proprietorship
a) Lack of capital
b) Sole trader has full responsibility to the business.
c) Unlimited liability to the sole proprietorship.
d) Sole proprietorship is not suitable for large business.

6. Partnership- An association of one or twenty people as co-owners to carry on a business for the sole purpose of making purpose.

7. Advantages of Partnership
a) Partnership can be easily formed.
b) Partners can help in decision-making.
c) Partners bring new skills and shared the ideas to the business.
d) More partners means more profits are earned.
e) Easy to expand business.
f) Every partner will have the responsibility for all the losses of the company.

8. Disadvantages of Partnership
a) Unlimited liability to all the partners.
b) Partners must be agree on the amount of authority.
c) Difficulty in finding partner.
d) Lack of capital.
e) Lack of trust between partners.

9. Limited Company- A company whose owners are legally responsible for its debts only to extent of the amount of capital they have invest.

10. Advantages of Limited Company
a) Limited liability to all shareholders.
b) Shareholders can sell or transfer their shares at the stock exchanged.
c) Limited Company can enjoy economies of scale.
d) Shareholders have no management worries.

11. Disadvantages of Limited Company
a) Respond slowly to market changes.
b) If one limited company fails, it may affect those who have many dealings with the money.
c) Problems may arise if the limited company grows too big.
d) The business will suffer if the board of directors are inefficient.
e) There might be lack of communication between employers as the organisation is larger.

12. 2 types of Limited Company
a) Private Limited Company
b) Public Limited Company

13. Advantages of the Public Limited Company
a) Shareholders can sell their shares on the Stock Exchanges.
b) They can advertise their shares.
c) Shareholders own the company and receives the profits.

14. Disadvantages of the Public Limited Company
a) Original owner may lose control.
b) They may face management problems
c) It is very expensive to set up.

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15. Co-operatives- An association of people who have the purpose of buying goods at a lower prices, market goods they produce to its member.

16. 2 types of Co-operatives
a) Worker Co-operatives- A cooperative owned and democratically controlled by its employees.

b) Consumer/Retail Co-operatives- A type of cooperative which employs economies of scale on behalf of its retailer members.

17. Advantages of Worker Co-operatives
a) The workers receives the profits.
b) They can take part in making decisions.

18. Disadvantages of Worker Co-operatives
a) It is difficult to raise money.
b) Goods & services may lack of variety.
c) Danger of unemployment.
d) Lack of capital.

19. Advantages of Retail Co-operatives
a) Owners have limited liability.
b) Members receives profits.
c) Managers run the organisation.
d) Co-operatives can enjoy economies of scale.
e) They are free from corporate income tax.

20. Disadvantages of Retail Co-operatives
a) Competition with large supermarkets.
b) If co-operatives too large and not all of its members take an interest in the organisation.

21. Types of shares & bond

a) Ordinary shares- It is found in markets. The ordinary shareholders are the owners of the company. The ordinary shareholders’ shares carry no fixed rates of dividends.

b) Preference shares- It carry a fixed rate of dividend. Preference shareholders are paid The dividends in full before the ordinary shareholders are paid.

c) Bonds or Debentures- They are not shares. The bonds entitle the holder to receive a fixed rate of interest regardless of whether the company is making profits.

22. Multinational Corporation- A large firms when a head of office in one country and several branches operating overseas. It is usually Limited Company. E.g. of company: Google Incorporation & Yahoo Incorporation

23. Advantages of Multinational Corporation
a) Introduction new production technique and skills to the host country.
b) It might produce better quality products.
c) Wider choice of products.
d) Better political ties between the countries.

24. Disadvantages of Multinational Corporation
a) Profits earned are returned to the overseas head office.
b) Local worker are paid very low wages.
c) The multinational company operate against the interest of the host country.

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25. Public Corporations- An organisation that are free to run their own affairs within broad ministerial guidelines. Engaged in business related to utilities such as water, gas, electricity, transportation & communication.

26. Advantages of Public Corporation
a) Not required to pay corporate tax.
b) Able to obtain loans easily from government.
c) They must be efficient & able to provide services to the best of their abilities.

27. Disadvantages of Public Corporation
a) Lack of introduce new ideas since they have to follow ministerial guidelines.
b) They may suffer disadvantages of large scale organisations. E.g.: Too much bureaucracy.
c) Main office may not be aware of what is happening in the branch office.
d) Public Corporation may be inflexible.

28. Privatisation- The government-owned companies become privately-managed companies.

29. Argument for privatisation
a) Firm will operate more efficiently in the private sector.
b) Ordinary people can become shareholders.
c) Money can be raised from the sale to improve government services.

30. Argument against privatisation
a) Prices may be raised.
b) Provision of socially necessary services.
c) State-owned companies might force smaller firms out of business.

31. Advantages of a Private Limited Company
a) Shareholders have limited liability.
b) Shareholders have no management worries.
c) Public Limited Company can advertise their shares.
d) The company has a separate legal identity.

32. Disadvantages of a Private Limited Company
a) All the detailed records of their spending, revenues & profits & to publish this information to their shareholders.
b) The original owners may lose control.
c) Company profits are taxed twice by the government.
d) The company cannot sell shares on the Stock Exchange Market.

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