CHAPTER 1.2 TYPES OF
ORGANISATION
Distinction between the private and public sectors (AO2)
Businesses can be classified as being in the public sector or the private sector
Private sectors:
are owned and controlled by private individuals and businesses, rather than the
government
differ in size
the main aim is to make a profit
Public sector:
under the ownership and control of the government
traditionally provide essential goods and services e.g. health care that private sectors
do not supply
organization wholly owned by the government are called state – owned enterprises
e.g. UK’s BBC
Main aim = achieve social benefits
Reasons for public sector business activity:
Ensures everyone has access to basic services – education, health, parks, libraries
Avoid wasteful competition – government can get economies of scale (cost savings)
Protect citizens and businesses – police, courts
Create employment – doctors, teachers, nurses
Stabilise the economy – several private sector banks bought by government (during
GFC to prevent further financial turmoil)
The main features of the
following types of for –
profit (commercial)
organisations (A03):
Sole traders
Definition:
, - Is an individual who runs and owns a personal business where the owner is held
responsible for its success or failure
- It is the most common type of business ownership
- An important legal point about sole traders is that the business is unincorporated
and bears full responsible for all losses/liabilities if the business collapses (owner is
responsible for all debts of the business
Example:
- self-employed plumbers or freelance photographers
Advantages: Disadvantages:
- Few legal formalities - Unlimited liability
- Profit taking (receives all profits - Limited sources of finance
made by business) - High risks
- Being your own boss - Workload and stress
- Personalised service - Limited economics of scale
- Privacy
Partnerships
Definition:
- Is a profit seeking business owned by two or more persons
- Ordinary partnerships, the maximum number of owners is 20
- Although it is not a legal requirement, most partnerships formulate a legal
agreement between each of the partners
- usually sign a legal agreement (mutually agreed contract)
Advantages: Disadvantage:
- Financial strength (more financial - Unlimited liability (debts can be
strength) repaid by either one partner)
- Specialisation and division of - A lack of continuity
labour (share work load) - Prolonged decision making
- Financial privacy - Lack of harmony
- Cost effective
Companies/corporations
Definition:
- Companies are businesses owned by their shareholder.
Notes:
ORGANISATION
Distinction between the private and public sectors (AO2)
Businesses can be classified as being in the public sector or the private sector
Private sectors:
are owned and controlled by private individuals and businesses, rather than the
government
differ in size
the main aim is to make a profit
Public sector:
under the ownership and control of the government
traditionally provide essential goods and services e.g. health care that private sectors
do not supply
organization wholly owned by the government are called state – owned enterprises
e.g. UK’s BBC
Main aim = achieve social benefits
Reasons for public sector business activity:
Ensures everyone has access to basic services – education, health, parks, libraries
Avoid wasteful competition – government can get economies of scale (cost savings)
Protect citizens and businesses – police, courts
Create employment – doctors, teachers, nurses
Stabilise the economy – several private sector banks bought by government (during
GFC to prevent further financial turmoil)
The main features of the
following types of for –
profit (commercial)
organisations (A03):
Sole traders
Definition:
, - Is an individual who runs and owns a personal business where the owner is held
responsible for its success or failure
- It is the most common type of business ownership
- An important legal point about sole traders is that the business is unincorporated
and bears full responsible for all losses/liabilities if the business collapses (owner is
responsible for all debts of the business
Example:
- self-employed plumbers or freelance photographers
Advantages: Disadvantages:
- Few legal formalities - Unlimited liability
- Profit taking (receives all profits - Limited sources of finance
made by business) - High risks
- Being your own boss - Workload and stress
- Personalised service - Limited economics of scale
- Privacy
Partnerships
Definition:
- Is a profit seeking business owned by two or more persons
- Ordinary partnerships, the maximum number of owners is 20
- Although it is not a legal requirement, most partnerships formulate a legal
agreement between each of the partners
- usually sign a legal agreement (mutually agreed contract)
Advantages: Disadvantage:
- Financial strength (more financial - Unlimited liability (debts can be
strength) repaid by either one partner)
- Specialisation and division of - A lack of continuity
labour (share work load) - Prolonged decision making
- Financial privacy - Lack of harmony
- Cost effective
Companies/corporations
Definition:
- Companies are businesses owned by their shareholder.
Notes:
