1.

2 Types Of Organisations
Public And Private Sectors
Some important goods and services are provided by state-run organisations as they are
deemed too significant to be left to the private sector. These include healthcare, education,
defence, and law and order. Public sector often have objectives which maintain employment
and environmental standards, preventing monopolies, and ensuring supplies of essential
goods and services

Public Sector
Comprises organisations accountable to and controlled by central or local governments.

Private Sector
Comprises businesses owned and controlled by individuals or groups of individuals

Mixed Economy
Economic resources are owned and controlled by both private and public sectors

Free-Market Economy
Economic resources are owned largely by the private sector with very little state intervention

Command Economy
Economic resources are owned, planned and controlled by the state

Privatisation
The sale of public sector organisations to the private sector. Profit-making becomes a main
objective.

Public Corporations
A business enterprise owned and controlled by the state - also known as nationalised.
+ Managed with social objectives rather than solely profit objectives
+ Loss-making services may still operate if the social benefit is great enough
+ Finance from government so no limitations due to shareholders
- Often inefficient due to lack of profit objectives
- Governmental subsidies can encourage inefficiencies
- Government may interfere in business decisions for political reasons
For-Profit Organisations

Sole Trader
A business in which one person provides the permanent finance and, in return, has full
control of the business and is able to keep all profits.
+ Easy to set up
+ Owner has complete control over the business
+ Owner keeps all profits
+ Able to choose work patterns, establish relationships with staff
- Unlimited liability
- Often faces intense competition from bigger firms
- Owner cannot specialise in all areas of business
- Difficult to obtain sufficient capital
- Lack of continuity

Partnership
A business formed by 2 or more people to carry on a business together, with shared capital
investment, and usually, shared responsibilities.
+ Partners may specialise in different areas of business
+ Shared decision making
+ Additional capital provided by partners
+ Losses shared between partners
+ Greater privacy and fewer legal formalities than corporate organisations
- Unlimited liability for all partners
- Shared profits
- No continuity and partnership has to be reformed in the event of a partner’s death
- All partners bound by individuals partner’s decision
- Cannot acquire share capital

Limited Companies

Limited Liability
The only potential loss a shareholder has if the company fails is the amount of invested in
the company, not the total wealth of the shareholders. Ownership of companies divided into
“shares”, which are purchased by “shareholders”

Unlimited Liability
The potential loss a shareholder has if the company fails is their total wealth. Any assets
may be used to pay off debts.
Unincorporated Status
Business owner bears all the responsibility and liability of the businesses’ actions.

Incorporated Status
Business owner becomes a separate legal entity to the business.

Continuity
If the owner dies, the company does not break-up or dissolve. Ownership continues through
the inheritance of shares.

Private Limited Companies (LTD)

A small to medium sized business which is owned by shareholders who are often family
members; this company cannot sell shares to the general public on the stock market.
+ Shareholders have limited liability
+ Incorporated
+ Continuity
+ Original owner retains control
+ Share capital can be raised by selling to family, friends, and employees
- Legal formalities involved in establishing business
- Share capital cannot be raised by selling to public
- Difficult for shareholders to sell shares
- Financial accounts available to public

Public Limited Companies (PLC)

A limited company, often a large business, with the legal right to sell shares to the general
public; its share price is quoted on the national stock exchange.
+ Limited liability
+ Incorporated
+ Continuity
+ Ease of buying and selling shares for shareholders (encourages investment)
+ Access to substantial finance through share capital
- Legal formalities in formation
- Cost of business consultants and financial advisers when creating PLC
- Share price fluctuations
- Legal requirements concerning information disclosure to shareholders and public
- Risk of takeover due to availability of of shares on the stock market
- Directors influenced by short-term objectives of major investors

For-Profit Social Enterprises

Social Enterprise
A business with mainly social objectives that reinvests most of its profits into benefitting
society rather than maximising profits. They directly produce goods or provide services, they
have social aims and use ethical ways to achieve them, and they need to produce a profit to
survive as they cannot rely on donations.
Objectives (Triple Bottom Line):
- Economic: make profit to reinvest into business
- Social: provide jobs or support for local communities
- Environmental: protect the environment to business in a sustainable way

Cooperatives
A group of people acting together to meet the needs and aspirations of its members, sharing
ownership and making decisions democratically. 3 main groups: Retail, Agricultural, Worker.

Microfinance Institutions
The provision of very small loans by specialist finance businesses, usually not traditional
commercial banks.

Public-Private Partnerships (PPP)

Involvement of the private sector, in the form of management expertise and/or financial
investment, in public sector projects aimed at benefiting the public.
+ Many school, prisons, roads, hospitals built through PPP
+ Private sector businesses aim to make profits; therefore efficiency normally higher
+ By using private sector finance, the government can claim improvement to public
services without increase in taxes
- Private sector management may try to increase profits by cutting staff wages and
benefits
- PPP schemes criticised for earning private sector large profits from high rent and
lease charges which are paid for by taxpayers
- Private sector organisations may lack necessary experience to operate public sector
projects, and failure could leave vulnerable groups at risk

Non-Profit Social Enterprises

Non-Profit Organisation
Any organisation that has aims other than making and distributing profit and which is usually
governed by a voluntary board.

Non-Governmental Organisations
A legally constituted body with no participation or representation of any government which
has a specific aim and purpose, ie. supporting disadvantaged groups in developing countries
or advocating the protection of human rights. Examples include: Médecins Sans Frontières,
Avocats Sans Frontières, Amnesty International.
Charities
An organisation set up to raise money to help people in need or to support causes which
require funding