Public and private sector organizations

Private sector – businesses owned and controlled by individuals or groups of individuals.

Ex: pathways school, Medanta hospital, max hospital, Ashoka university, le march, modern
bazaar, etc.

Public sector – organizations that are primary.

Ex: AIIMS, public school, ration stores, etc.

PPP – public-private partnership – public sector may not have enough finances hence they
collaborate with a private sector.
Ex: metro stations, petrol pumps, etc.

Privatization – a piece of public sector is being sold to a private sector. (When public sector
wants to buy)
Ex: tata, kingfisher

Three types of businesses (profit-based organizations)

Most businesses that operate in the private sector aim to make profit. A business can only
survive and grow if it is profitable.

Type 1: Sole trader

Sole + trader
Sole = alone
Trader = someone doing business
= 1 owner only (0 equity)

 When a single person is running the business, financing the business, and running
the business.
- Can have people working under them but own it themselves only.

Incorporated business vs un-incorporated business

1956 companies’ law – every country has a law.

All types of busine

Incorporated
When the owner of the business is separate from the business itself
- Government thinks the business is run by an artificial person.
Ex: Paying check to school – pay to (school name), not the name of the person
There is no person called (school name). The school opens a bank account.
Incorporated – artificial person
Ex: pathways school Gurgaon
- Can do anything a living person can do in a business.
- On behalf of the country, the owner signs all documents
 - Stem is required.
Ex2: Reliance
Ambanis are owner’s coz they have maximum shares in the company.
Ex: Vijay Malia case – loan was taken from kingfisher, owner ran away
Bank has the right to sell the things under the company if such things happen.

Separate legal entity – incorporated.

Ex: private and public companies

Un-incorporated
- No division between owner and business
- Sole trader = un-incorporated
- person cannot open an account in behalf of the business
ex: sole traders and
limited liability vs. unlimited liability

un-incorporated business = unlimited liability

incorporated business = limited liability

If the person and company are separate, then the amount at which the share is taken, the
person is only liable for that much money/ loan.

If a person and the company are together, then the person has an unlimited liability to the
bank.

Advantages –
1: Easy to set up
2: Owner has complete control
3: Owner keeps all profits
4: Quick decision making
5: flexible and can react quickly to change
6: Able to establish close personal relationships with staff and customers

Disadvantages –
1: unlimited liability – all of an owner’s assets are at risk
2: Limited access to finance
3: Owner is responsible for all aspects of management and does not benefit from expertise
of partners or owners
4: No benefit of economies of scale (not important for now

Partnerships

Minimum of two people

To help a person run the business.
When two or more people jointly own and take responsibility for the business
To be partner – you need to bring finance to the business.
Advantages –
1: partners bring different expertise to the organization
2: Shared decision-making
3: Still small enough to be flexible
4: additional finance invested by each partner

Disadvantages –
1: Unlimited liability for all partners
2: profits are shared between partners
3: More people can slow down decision-making
4: There can be conflict between partners
5: If one person dies, the partnership comes to an end automatically (if there are 5 people,
and one dies then it is important to find a replacement for the partnership for an equal ratio
of shares as it was before.)

- Sole traders and partnerships do not have shares – private assets are not safe

What are shares?

Part of the whole

Sharing a part of the whole

Ex: a company’s starting point is a pizza

Cut into slices.
Whole pizza cut into slices represents parts of the company.
Dividing it based on how much they want to divide the company.
More people/ more slices = more shares
A slice represents a share.

Public company (pvt. Ltd.) – shares are open for any public to buy allowing anyone to be a
shareholder through stock exchange (virtual market where shares are purchased and sold)
- Shares can be easily transferred.
Ex: Coca cola, Microsoft, nike, apple, etc.

Private company – can only sell their shares to their friends and family (not listed to stock
exchange)
- Shares can only be transferred when it is accepted by the board of directors.
Ex: Ikea, rolex, lego, chanel, etc.

Continuity – in a company, the death of an owner or director does not end the company.

Stakeholder – anyone who is impacted by the decision by the business.

Shareholder – people who own the shares.