Types of organisations

Organisations

There are many different types of organisations that businesses can

choose from.

However, this choice depends on the country in which the business

operates.

We are analysing the UK system but it is broadly similar to the systems

in most countries.
 Types of organisations
A first distinction can be made between public and private organisations. Some
organisations operate within the public sector, whereas others operate within the
private sector.
Public sector organisations generally offer services that the State believes are
essential for the general public, i.e. education, healthcare, transport. They are
owned or majority controlled by the State.
Private sector organisations are all businesses owned and controlled by private
individuals or entities.
Privatisation

States can decide whether to keep services in the public sector or whether to
transfer these to the private sector

PRIVATISATION

This can have positive and negative consequences. One advantage is that
private sector organisations are generally more efficient. However, if they
become monopolies they may increase prices for the users of the service.
Nationalisation

States can decide to transfer services from the private sector to the
private sector

NATIONALISATION

This can have positive and negative consequences. One advantage is

that there is greater control over prices charges to users. However,
they may become inefficient.
Types of organisations
Types of
organisations

For profit Not for profit

Social enterprises
organisations organisations

Unincorporated Incorporated Cooperatives Charities

Non governmental
Private limited Public limited Public private
Sole traders Partnerships organisations
company (ltd) company (plc) partnerships
(NGOs)

Microfinance
institutions
Characteristics to distinguish types of
organisations
Incorporation – a business is incorporated when it is a separate legal
entity and has a separate legal identity from its owners.

Limited liability – a business has limited liability when the shareholders

(owners) of the business are only responsible to the extent of the
amount they have invested in the shares of the business
Characteristics to distinguish types of
organisations
Incorporation – a business is incorporated when it is a separate legal
entity and has a separate legal identity from its owners.

Limited liability – a business has limited liability when the shareholders

(owners) of the business are only responsible to the extent of the
amount they have invested in the shares of the business
Characteristics to distinguish types of
organisations
Continuity – a business has continuity when the death of the owner
does not impact on the existence of the business
Sole trader

A sole trader is an unincorporated organisation with unlimited liability

owned by an individual.
Advantages Disadvantages

Full control of business Unlimited liability so the sole trader will pay for any
debts of the organisation with his/her personal assets
Sole trader keeps all profits earned No specialisation

Legal formalities are low Hard to raise capital

Easy to set up No continuity

Partnership

A partnership is an unincorporated organisation formed by 2 or more

individuals who share risks and responsibilities
Advantages Disadvantages

Partners may bring different areas of specialisation to Unlimited liability so the partners will pay for any
the partnership debts of the organisation with their personal assets
Losses are shared Profits are shared

Legal formalities are low Difficult to raise capital

Easy to set up No continuity

Cakes too explain incorporation and limited
liability
This is a cake cut into 8 slices but it also represents a business with 8
shares.
Are you hungry? Would you like to buy some
shares?
Each share has a nominal value of €0,50, so the total value of my
company is 0,50*8= €4,00.

Who is willing to buy 1 or more shares for €0,50?

Cakes and incorporation
Once you have bought the shares you own part of the
business. If the business does well you will be
rewarded through dividends or through an
increase in the value of your shares.
If the business fails you will lose the amount you
invested in the business, i.e. you have limited liability:
you do NOT lose beyond what you have invested, you do NOT pay with
your personal assets
Limited company (Ltd)

A limited company is an incorporated organisation with limited liability

owned by shareholders who cannot sell shares to the general public
Advantages Disadvantages

Shareholders have limited liability Greater legal formalities

Separate legal identity Shareholders may find it difficult to exit the company

Continuity Capital cannot be raised by selling shares to the

general public
Easier to raise capital by selling shares to family and
friends
No takeover risk
Public limited companies (plc)

A limited company is an incorporated organisation with limited liability

owned by shareholders who cannot sell shares to the general public
Advantages Disadvantages

Shareholders have limited liability Legal formalities are significant

Separate legal identity Share price is subject to fluctuation – greater visibility

Continuity Information disclosure requirements – annual reports,

board changes
Capital raised by selling shares to the general public Risk of takeover

Ease for shareholders to trade shares High costs of flotation

Greater visibility
You try - Plc or Ltd?

Company Ltd or Plc?

IKEA
LEGO
Nike
Michelin
Chanel
Mars
Samsung
Types of organisations
Types of
organisations

For profit Not for profit

Social enterprises
organisations organisations

Unincorporated Incorporated Social enterprises Charities

Non governmental
Private limited Public limited
Sole traders Partnerships Cooperatives organisations
company (ltd) company (plc)
(NGOs)

Public private
partnerships

Microfinance
institutions
Social enterprises

These are revenue generating businesses that have economic, social

and environmental objectives (triple bottom line)

They do not have profit as their main objective.

Examples include:

Change.org https://www.change.org/

Lifestraw https://www.lifestraw.com/
Cooperatives

A group of people, who are known as members, who share ownership

of the organisation and work towards common aims and goals.

They are often one of the 3 categories below:

• Retail cooperatives

• Worker cooperatives

• Housing cooperatives
Public private partnerships (PPPs)

These are partnerships between the public and private sector, where
frequently the latter provides capital and/or expertise for the
realisation of public interest projects.
Microfinance institutions
These are institutions which provide small loans in rural communities,
especially to women. The interests they charge are high as these people are
often unable to provide collateral and are frequently insolvent. Although
they have provided benefit to some people with entrepreneurial skills who
would otherwise not have had access to capital, they have also caused
greater problems for those who cannot afford the high interest repayments
and end up in a spiral of debt.
http://www.grameen.com/
NGOs

Non-governmental organisations are organisations that operate

independently from governments but are generally set up for social,
political, advocacy, environmental and/or human rights purposes

https://www.amnesty.org/en/

https://www.worldwildlife.org/
Charities

These are non-profit organisations that are generally established for

charitable purposes. They are often supported by governments who
give them tax relief.

https://www.barnardos.org.uk/

https://www.heartfoundation.org.au/
Look up these businesses and find out what
they are
For this project you will go to three websites and fill in the answers to the questions regarding each company.

Dunkin’ brands Hong Kong Disneyland Cancer Research UK

Resort

website
What do they do?

What type of
organization?

History of the business