PAUL A. BORG B.A. (Hons) Econ., Dip. Lab. Stud.

Economics Course
Unit 4: Types of Business Organisations
Text (2010 Ed.)

4.1 Industries, Firms and Plants

4.2 The Entrepreneur
4.3 Private sector and Public sector
4.4 The Sole Proprietor
4.5 The Partnership
4.6 The Company
4.7 The Cooperative
4.8 The Public Corporation
4.9 Summary
This Unit covers the following parts of the SEC 10 syllabus (2010):
3.1 Private sector and public sector
Candidates should be able to
 distinguish between private and public sector;
 assess their relative importance in the economy.
3.4 Different types of firms in private sector
Candidates should be able to:
 distinguish between different ways of organising production in the private
sector:
sole trader, partnership, companies and co-operative.

4.1 Industries, Firms and Plants

The terms ‘plant’, ‘firm’, and ‘industry’ are used interchangeably in ordinary language. In
economics language they have particular meanings.
The plant (or establishment) is the place where production is carried on. It may consist of a
building such as a shop, a factory, a workshop, a warehouse, a garage or an office. It may also
consist of a yard (open air) such as a shipyard.
The firm (or business organisation) is the unit of ownership. A firm may own one or more plants.
There are various types of firms and this is the main subject of this unit.
The industry is a category that groups a number of firms producing similar products. Thus, for
example, according to NSO News Release 279/2006 of 12/12/06, as at 31 December 2004 in Malta,
the Construction Industry consisted of 3,783 firms being 3,491 sole proprietors and partnerships,
284 private and public companies and 8 other types. At the same date, the Hotels and Restaurants
industry consisted of 1,201 firms being 979 sole proprietors and partnerships, 186 private and
public companies and 36 other types. This does not mean that there were 1,201 hotels and
restaurants since a firm may own more than one hotel or restaurant. The actual number of hotels
and restaurants (the plants) was probably higher. Of course, an industry might also consist of one
firm only. Thus, for example, the provision of electrical supply in Malta is an industry where there
is only one supplier, i.e. Enemalta Corporation. In this case, economists talk about a monopoly, a
subject that will be discussed later on in the course.
Finally it may also be said that some economists define an economy as being a number of
industries operating in some particular territory. Thus we may say that the Maltese economy
consists of a number of firms classified in a number of industries. Some of the firms involved have
just one plant whilst other firms have two or more.
Thus, for example:
 SBT Ltd is a firm involved in the Auto Repairs Industry (Private services) in the Maltese
economy; it owns 7 plants being an office in San Ġwann, a repair garage and a separate

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servicing garage, also in San Ġwann, a shop for used cars and auto spare parts in B’Kara,
two storage yards, one in San Ġwann and one in Għargħur, and a storage garage in Mosta.
 Redeemer Furniture is a firm involved in the Furniture Industry (Manufacturing) in the
Maltese economy; it owns 4 plants being a factory in Marsa and 3 showrooms, one each in
Żurrieq, Żabbar and Sta Venera.
It may also be wise to define ‘brand names’ since we also tend to use these as well as the term
‘firms’ interchangeably. In commercial terms, the brand name is the name given to a product.
 Thus, for example, Kinnie is a brand name of a product manufactured by the firm,
Simonds Farson Cisk plc (SFC) at its plant (factory) in Mrieħel; SFC is a firm involved in
the Beverages Industry in the Maltese economy.

4.2 The Entrepreneur

We saw in Unit 1 that the functions of the Entrepreneur are to bear risks, organise and manage a
firm. These three functions may be carried out by one person or by different persons.
Risk-bearing has to do with ownership, i.e. it is the owner/s of the firm who finance (give money
to) the firm to start off. Owners expect a return on the money so given otherwise they wouldn’t
part with it. This return will be forthcoming if the firm is successful. If, however, the firm is
unsuccessful, the owners lose the money they had put into their business. This is the risk that the
owners of the firm are running. They also run the risk of not getting as much as they had expected
or as much as they would have got if they had put their money in some other firm.
Organisation has to do with the way that the firm is structured, i.e. who is to make decisions, who
answers to whom, and so on. This function is carried out by Directors, who are sometimes the
owner/s themselves, in some types of firms, or by other persons in other types of firms.
Management has to do with carrying out (implementing), on a day-to-day basis, the decisions of
those who do the organisation. The functions of management are to coordinate, control,
communicate and take care of the morale of the labour force. These functions will be further
discussed in Unit 6.
We may thus summarise the above functions as follows:
ENTREPRENEURSHIP
↓
↓ ↓ ↓
RISK- ORGANISATION MANAGEMENT
BEARING
(Owner/s) (Directors) (Managers)
↓
↓ ↓ ↓ ↓
COORDINATION CONTROL COMMUNICATION MORALE
Fig. 4.1: The functions of Entrepreneurship and the functions of Management

4.3 Private sector and Public sector

We may now distinguish between the private and the public sectors in terms of the functions of the
entrepreneur. The first difference between the public and private sectors, thus, has to do with
ownership or risk-bearing. The Private sector is made up of firms owned by an individual or
individuals. The Public sector is made up of firms owned by the government.
The second difference regards organisation. In the private sector, the directors (organisers) are
elected by the owners. Thus in a limited company, an Annual General Meeting (AGM) is held for
the owners and at this meeting, the owners hold an election for a number of directors who will take
care of the day-to-day running of the business. The day-to-day running of firms in the public
sector is also in the hands of directors. However these directors are appointed by the government
and not elected.
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There is no difference between the private and public sector with regards to management, i.e. the
functions are the same and the procedure to put them in place is the same since managers are
always employed by the directors.
There are four main types of business organisations in the private sector: the Sole Proprietor, the
Partnership, the Company and the Cooperative. The main type of business organisation in the
public sector is the Public Corporation, which is a firm that is fully owned by the government. The
public sector in Malta includes para-statal industries, which are companies in which the
government is the majority shareholder (owner), ex. Air Malta plc and the National Orchestra Ltd.
In general, all types of firms in the public sector are also called quangos, which stands for quasi-
autonomous national governmental organisations.
The Public sector in Malta is important because it includes firms that supply what economists call
facilitating capital. This refers to the country’s infrastructure such as roads, tunnels, bridges,
canals, railways, airports and seaports. Thus, for example, electricity is generated and distributed
through Enemalta Corporation and potable water is processed and distributed by the Water
Services Corporation.
The relative importance of each sector may also be measured by the number of workers employed
by each. According to the Labour Force Survey of 2006 (http://www.nso.gov.mt), 70.3% of the
gainfully occupied population is employed with the private sector while 6.6% are employed with
public corporations. Another 2.7% are employed with para-statal firms such that 9.3% are
employed with quangos. The other 20.4% are employed with government departments and
ministries. This shows that the private sector in Malta is relatively more important with regard to
employment. However the same survey also shows that, on average, a worker in the private sector
earns less than one in the public sector.

4.4 The Sole Proprietor

The sole proprietor type of firm has one owner. It is important to restate that we are, here, talking
about ownership. Thus if you go into a shop and see two or more persons working there, this does
not necessarily mean that it is not a sole-owner type since sole-proprietors may also employ
workers. These workers, though, are NOT owners. To know whether the firm is a sole-proprietor
type, you have to ask who the full owner is. If full ownership is vested in one person, then it is a
sole-proprietor or sole-owner type of firm. This is also called the one-person business. In this
type of firm, the three functions of the entrepreneur are usually carried out by the same person, i.e.
the sole owner. Sometimes, though, sole owners also employ managers especially if the firm
becomes large or have a number of plants. The sole owner is seen to be employing himself or
herself by the law and thus sole owners are also called self-employed persons.
Some confusion arises between the terms sole proprietor (or sole owner) and sole trader. This
latter term say two things about the firm, i.e. it is owned by one person AND its function is the
buying and selling of goods, since that is the meaning of ‘trader’. Thus the term sole owner is a
better name for this type of firm since it simply means a firm with one owner irrespective of the
productive activity of the firm. Thus, for example, a local carpenter cannot be a sole trader since
his activity is manufacturing and not trading. A local grocer would be both a sole owner as well as
a sole trader. Thus the latter term is more appropriate since it covers all types of productive
activity.
At law, this type of firm is not seen as having a separate existence from its owner. We say that the
sole-proprietor type of firm is NOT a legal person, i.e. the owner cannot legally separate his
personal wealth from the assets of the firm. Moreover, the owner of such a firm has unlimited
liability. This means that the sole-proprietor is risking all that he/she has and not just the amount of
money that the owner has put into the firm.
We find this type of business organisation in industries like farming, carpentry, repairs, the grocery
trade and the retail trade in general, as well as personal services such as hairdressing and private
lessons.
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Some advantages of the sole-proprietor type of firm include:

 It is easy and inexpensive to start and maintain.
 It is flexible and capable of quick changes when market conditions change.
 There is a great incentive for the owner to run the firm efficiently (i.e. make as little expenses
as possible and do most of the work rather than employ others to do it) since he or she does
not have to share the profits with anyone.
 From the consumer point of view, some sole proprietors also supply certain services such as
informal credit and free delivery.
Some disadvantages are:
 The owner is personally liable for the debts of the firm since the firm is not legally seen as
being an entity separate from its owner.
 The owner’s liability towards the debts of the firm is unlimited.
 It may be difficult to obtain loans for expansion because sole ownership is thought to be a
high-risk business.

4.5 The Partnership

The partnership type of firm has two or more owners but the firm is not legally seen as having a
separate existence from its owners. Again it is ownership that counts and not the number of
persons working in the plants of the firm. Partnership type of firms are found mostly in such
professions as accounting, law and medicine. Some examples are Carm A Fenech & Co., Curmi
Paris Scicluna & Co., two firms in the Accounting profession and Borg & Vella Machinery of
Buskett.
Maltese law distinguishes between partnerships en nom collectif and partnerships en commandite.
A partnership en nom collectif “may be formed by two or more partners and operates under a
partnership name and has its obligations guaranteed by the unlimited and joint and several liability
of all the partners” (Companies Act, 1996). This means that the partners do not have limited
liability. In this type of firm, the three functions of the entrepreneur are carried out by all the
partners individually, i.e. all partners are risk-bearers, directors and managers. They may or may
not make decisions collectively. This means that a decision by one partner is taken to be the
decision of all the partners. Thus a partner may decide and carry out a decision without consulting
the other partners. In the year 2000, there were 460 of this type of partnerships in Malta.
A partnerships en commandite may also be called a Limited Partnership. This type of business
organisation, “operates under a partnership-name and has its obligations guaranteed by the
unlimited and joint and several liability of one or more partners, called general partners, and by the
liability, limited to the amount, if any, unpaid on the contribution, of one or more partners, called
limited partners” (Companies Act, 1996). Thus in this type of firm, some partners have unlimited
liability (general partners) while others (limited partners) have limited liability, as long as at least
one of the partners has unlimited liability. In this type of firm, the three functions of the
entrepreneur are carried out by the general partners while the limited partners are only risk-bearers.
In the year 2000, there were 35 limited partnerships in Malta.
Partnerships must be registered with the Registrar of Companies and are formed by a Partnership
Deed (sort of a contract) that must also be registered with the Registrar. Such deed must contain:
(a) the name and residence of each of the partners;
(b) the partnership-name;
(c) the registered office in Malta of the partnership;
(d) the objects of the partnership, that is to say, whether the objects are trade in general or a
particular branch of trade, and in the latter case, the nature of the trade;
(e) the contribution of each of the partners, specifying the value of the respective contribution of
every partner;
(f) the period if any fixed for the duration of the partnership (Companies Act, 1996).

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Partners in a partnerships en nom collectif and the general partners in a partnerships en

commandite are also deemed to be self-employed persons like sole owners.
The advantages of the partnership type of firm are the same as those of the sole proprietor though
in addition to this type of firm:
 Partnerships are able to raise more money for financing the business since there is more than
one owner;
 Management may be specialised since each partner may be made responsible for separate
departments. Thus Borg & Vella may have Borg specialised on the purchase and repair of
machinery whilst Vella concentrates on the sales and marketing department.
The disadvantages are the same as for the sole proprietor in addition to the fact that the survival of
the partnership depends upon a continued harmonious relationship between the partners in
situations that may cause disagreement since each partner may carry out his/her own decisions
without consulting the other partners.

4.6 The Company

The company is also known as the joint stock company or the limited liability company. Like the
partnership it has two or more owners. This time, though, it exists legally as an entity separate
from its owners, i.e. the law recognises the company as a person. We may thus define the
company as a legal person created by human persons to do business.
To set up a company, the promoters (people forming the company) must write various documents;
two of the most important are the Memorandum of Association and the Articles of Association.
These documents must then be submitted to the Registrar of Companies (in Malta, the
Registrar’s office is at the Malta Financial Services Authority or MFSA). When the Registrar (the
person holding the Register of companies) has checked and accepted these documents, he issues a
Certificate of Registration. No company can start business without this latter document.
The Memorandum of Association must contain:
 whether the company is a public company or a private company;
 the name and residence of each of the subscribers thereto;
 the name of the company;
 the company's registered office in Malta;
 the objects of the company;
 the amount of the Authorised capital, and the division thereof into shares of a fixed amount;
 the number of the directors and the name and residence of the first directors;
 the name and residence of the first company secretary or secretaries;
 the period, if any, fixed for the duration of the company; and
 in respect of each shareholder, director and company secretary, the number of an official
identification document should also be given.
The Articles of Association is a document that sets out the rules and regulations governing the way
the company will be run. It contains:
 rights of different classes of shareholders,
 frequency and types of company meetings,
 how company officers are to be elected,
 the powers of directors.
The owners of the company are called shareholders since they hold shares in the capital of the
company. It is part of the duties of these shareholders to meet at least once a year at the Annual
General Meeting (AGM) and to elect a Board of Directors, which may or may not be made up of
the same shareholders. It is then the duty of the Board of Directors to tend to the day-to-day
running of the business. Sometimes the Board of Directors employs Managers to do this task on
behalf of the Board but the final decisions always rest with the Board of Directors. Thus in a

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company, Shareholders carry out the risk-bearing functions, Directors carry out the organisation
function, while Managers carry out the management function.
When a company is set up, the promoters decide also on how the capital of the company is going
to be issued. Thus they first decide on the total amount, say €20,000, then they decide on how this
amount is going to be divided into smaller units. These smaller units are called shares. Thus the
€20,000 capital may be divided into 40,000 shares of 50c each or 20,000 shares of €1 each or
10,000 shares of €2 each or any other combination such that the total is €20,000. These shares are
then issued for sale and the buyers of these shares become shareholders (owners) of the company.
It is important to note that the shareholders are NOT the owners of the assets of the company but
of the company itself. The owner of the company’s assets is the company itself since a company
has the status of a person at law.
At the end of its financial year, the Board of Directors has to see that final accounts are drawn up.
These accounts are to show the profits that the company made and how they are going to be
divided. Usually, a part of the profit is kept by the company (company reserves) and the other part
is divided amongst the shareholders since they are the owners. The amount of profit that each
share gets is called the dividend. Thus, if the Board decided that each share gets a dividend of 20c
and Ms Bonello holds 500 of these shares, then she gets 10,000c or €100.
Various types of shares may be issued of which the more important are the following:
Ordinary shares give their holder what is left of the profits of the company after all other claims
are met. The dividend is NOT fixed but depends on the profits of the company and on the dividend
policy of the Board of Directors. These shares entitle their holder to vote at the AGM.
Non-cumulative Preference shares carry a prior right to a share in the profits of the company.
The rate of return on these shares is a fixed percentage of their nominal value. Preference
shareholders do not usually have voting powers. The Board of Directors may decide not to give
dividends and thus the non-cumulative preference shareholders loose those dividends for ever.
However the Directors cannot decide to give dividends to the ordinary shareholders without first
giving dividends in full to the non-cumulative preference share holders.
Cumulative preference shares have the same features as non-cumulative preference shares
except that when the company decides not to give out dividends in a certain year, those dividends
may not be lost since cumulative preference shareholders may receive payments of any arrears of
dividends in later years. Prior right is thus given to arrears of cumulative preference shares.
When discussing the capital of a company it is important to distinguish between various
definitions. Three of the more important ones are:
The Authorised capital is the maximum capital that the company is allowed to raise. It is written
down in the Memorandum of Association.
The Issued capital is the nominal value of the shares actually issued.
The Paid-up capital is the amount of capital actually contributed by the shareholders.
Till now we have discussed companies as if there was just one type. In fact there are two types of
companies, i.e. the private company and the public company. They both have the same features as
above but in addition:
Private Companies must (a) restrict the right to transfer its shares, (b) limit the number of
members (shareholders) to fifty; and (c) prohibit any invitation to the public to subscribe for any
shares or debentures of the company, according to the Companies Act 1995. Their name must end
with the word Limited or the abbreviation Ltd. The Authorised Capital of a private company must
not be less than Lm500 (€1165).
Public Companies are companies that do not qualify as private companies. A public company
may offer shares or debentures to the public. Their name must end with the words public limited
company or the abbreviation plc. The Authorised Capital of a public companymust not be less than
Lm20,000 (€46,600).

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The basic difference between these two types of companies is that the private company is not
allowed to issue shares to the general public and any existing shareholder must first offer his
shares to the other shareholders if he or she wants to dispose of them. The public company,
however, is allowed to issue shares to the general public, which it must do by means of issuing a
prospectus. Also, if existing shareholders want to sell their shares they may do so usually through
the stockbrokers at the Malta Stock Exchange.
Table 4.1 shows the number of companies in Malta for 1976 and 1992 classified according to
whether they are private or public companies and also according to their capital.
1976 1992 2000
Private 3,176 11,572 17,173
Public 44 43 64
Total 3,220 11,615 17,237
Table 4.1: Joint stock companies in Malta analysed by type.
Source: Annual Abstract of Statistics 1976, 1997, 2000
As may be seen from Table 4.1, the number of companies registered in Malta increased by about
560 new companies a year between 1976 and 2000. The following are some of the advantages of
the company over the other two types of business organisations, which may also account for this
increase.
 Companies find it easier to obtain finance because they offer their owners limited liability.
Limited liability means that the owners are liable for the debts of the company only up to the
limit of the amount of capital they have promised to contribute.
 Companies are not affected by changes in the life of their owners. This advantage comes from
the fact that the company is a legal person. When a sole owner retires, the firm finishes with
him or her. In the case of companies, when an owner decides, he or she may simply transfer
their shares. This is even easier in a public company than in a private company.
 Ownership and control may be vested in different people. There are people who would like to
be owners but they would not like to run the business themselves. Companies offer this type
of individual the opportunity to do so.
The main disadvantages of companies are:
 There are more legal procedures to be followed by companies than by sole owners or
partnerships. Thus companies may find it difficult to adapt to changing market conditions.
 Each year, companies must leave a copy of their final accounts with the Registrar of
Companies. Anyone can see these accounts and, thus, certain business secrets cannot be kept.
Public companies have the further disadvantage of having to make their accounts public
usually by means of having them printed in newspapers. This is not only a costly exercise but
also gives away more secrets especially to competitors. This may explain why some
businessmen prefer to borrow large sums of money from banks and remain sole proprietors
rather than turn their firm into a limited liability company.

4.7 The Cooperative

Cooperatives (Coops) have the same basic features as companies with the important distinction
that the rule is one-person-one-vote and not one-share-one-vote as is the case with companies.
There are various types of coops of which the two more important are the Producer Coop and the
Consumer Coop.
Producer cooperatives are limited liability companies owned by the workers themselves. An
example is the Koperattiva tal-Minibuses. This type of coop may also be owned by the suppliers
as, for example, growers of grapes. Thus the Farmers’ Wine Coop is owned by the growers of

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grapes who supply grapes to their coop which, then, processes the grapes into wine and sells this
product to the various retail outlets. The main features of producers’ coops are:
 they are set up by the workers or suppliers;
 the capital is raised by the workers or suppliers themselves;
 management is elected from the ranks of the workers;
 profits are shared according to some agreed formula;
 power is shared on the basis of one member one vote.
Consumer cooperatives are limited liability companies owned by the buyers. An example is the
Agricoop of Żebbuġ. This coop imports and supplies agricultural machinery and equipment. It is
owned by the same farmers who buy their equipment from their own coop. The main features of
the Consumer coop are:
 it is set up by the consumers;
 the capital is raised by these same consumers;
 management is elected from the ranks of the consumers;
 profits are shared according to the value of a member’s purchases;
 power is shared on the basis of one member one vote.
In 1976, cooperative societies in Malta numbered 25, out of which 14 societies were involved in
agricultural produce. There were 2 consumer coops and 1 of each involved in agricultural
equipment, agricultural trading, milk producing, pig producers, food and fruit, wine producers,
fishermen, credit, and burdnara. As may be seen, 20 out of 25 or 80% of cooperative societies
were concerned with agriculture. The total number of members of these 25 coops was 2,833 giving
an average of about 113 members per coop.
In 1997, the number went up to 42 societies involved in much more varied sectors of production.
Thus 9 societies were involved in agricultural produce. No consumer coop existed in 1997. There
were 1 of each involved in milk producing, pig producing, wine producers, poultry breeding,
burdnara, carpentry, catering, management consultancy, publishing and printing, and textile
production. There were 2 of each involved in cleaning and maintenance, construction, fishing,
media, and socio-cultural affairs. Finally, 6 societies were involved in commerce and retail whilst
7 were in the transport sector. Thus, in 1997, only 13 out of 42 societies or 31% were involved in
agriculture. The total number of members of these 42 coops was 5,171 giving an average of about
123 members per coop. (Source: Annual Abstract of Statistics 1976 (p.247), 1997 (p.248)).
The advantages of coops are basically the same as those of companies with the further advantage
that their tax liability in Malta is less than that of a company.
A main disadvantage of coops is that they are set up to run business in a way as to give certain
advantages to their owners who are also suppliers or buyers. Because of this, the management of
the coop may sometimes not be very professional and the coop may become bankrupt due to
mismanagement.

4.8 The Public Corporation

Whereas the previous types of business organisations formed part of the private sector, the public
corporation is the business organisation used in the public sector. It is important to note that the
public company is part of the private sector since it is not a type of firm owned by Government.
Some examples of public corporations in Malta are Enemalta Corporation (see fig. 4.2), Water
Services Corporation, the Employment & Training Corporation (see fig. 4.2), the Malta Maritime
Authority, the Public Transport Authority and the Malta Environment and Planning Authority
(MEPA).

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Fig. 4.2: The Logos of Enemalta Corporation and of the Employment & Training Corporation (ETC)
Like companies, public corporations are separate legal entities, i.e. even if the Government is the
owner, the corporation is not part of Government in the same way that, for example, the Inland
Revenue Department is. Thus, for example, you can take a public corporation to court but you
cannot take the Inland Revenue Department. In the latter case, you have to sue the Government.
With the public corporation you do not sue the Government but the actual firm.
The public corporation is 100% financed by the Government. It is not a company in which the
Government has some or even a majority shareholding. In this case we talk about para-statal
organisations.
The public corporation, like the company, has a Board of Directors but this Board is appointed by
the Government and not elected by shareholders, as is the case in companies. This is obviously so
since there are no shareholders in the public corporation since this is a business organisation
belonging to the people of the country as a whole and run, on the people’s behalf, by its
Government. The Board of Directors of the public corporation is answerable to the Government
and, in fact, at around budget time (usually November/December), you may read the reports of the
various public corporations on the newspapers as presented in Parliament.
In general, the policy of the public corporation is determined by the Government, through an Act
of Parliament, that sets up the Corporation. Usually a particular Minister or Parliamentary
Secretary is given the responsibility for seeing that the particular corporation is acting within the
broad policy requirements laid down by Parliament. This policy usually states that the aim of the
corporation is to act in the public interest and to cover its costs. This is obviously different to
companies whose aim is to make profit even if they do this without taking into account the public
interest.
Sometimes, Governments may take over all the firms in a particular industry. In this case we talk
about nationalised industries.
To acknowledge the advantages of public corporations, we have to wait for the unit that covers
market failure and privatisation.
The main disadvantage usually associated with public corporations is political interference. This
may cause instability when the political party in Government changes and with this come changes
in the composition of the Boards of Directors of some or all the public corporations. Another
disadvantage is what is known to economists as the crowding-out effect. In simple terms, this
means that since Government is investing in, say, energy (eg. Enemalta), no private-sector firm
would have the necessary finance to compete with the Government and, thus, no private-sector
investment is forthcoming in this sector. The Government would have ‘crowded out’ (pushed out)
private-sector investment.
Finally, it might be important to distinguish between the term ‘corporation’ as used in the United
States and the same term used in the rest of the English-speaking world. In the US, the term
‘corporations’ is used for what we in Malta call companies. Thus, for example, the company which
owns the Pepsi brand is called Pepsi Cola Inc. in the US where Inc. stands for Incorporated and,
thus, the Pepsi Cola company is, in the US, the Pepsi Cola Corporation. Companies are called
corporations in the US since this country does not have any public corporations, as we know them
in Europe, i.e. the central Government of the US (Federal Government) does not own business
firms. These are owned by the various State Governments but not by the Central or Federal
Government.
Unit 4: Types of Business Organisations – Text (2010 Ed.) Page 9 of 10
…/cont PAUL A. BORG - Economics

4.9 Summary
In summary, we may thus chart the types of business organisations or firms as follows:
Firms

Owned by Owned by
individuals Government

One owner More than one Public

owner Corporations

Sole Proprietor
No separate legal Separate legal
entity entity

Partnership
One share, one One person, one
vote vote

Company Cooperative
Fig. 4.3: The main types of business organisations
The following table shows the number of types of business organisations as at 31 December, 2004.
2004 Type of Bus. Org. Employment
Stage SO/P Company Other Total SO/P Company Other Total
1 54 18 0 72 115 212 0 327
2 2,856 657 18 3,531 5,999 21,325 190 27,514
3 22,898 3,152 137 26,187 39,288 35,660 1,972 76,920
Tot. 25,808 3,827 155 29,790 45,402 57,197 2162 104,761
Table 4.2: Types of business organisations in Malta analysed by type and number of workers.
Source: NSO News Release 279/2006 of 12/12/06
As may be seen from Table 4.2, the number of Sole Owners and Partnerships (SO/P) is far greater
than that of companies, co-ops and public corporations. 25,808 Sole Owners/Partnerships employ
45,402 workers, giving an average of slightly less than 2 workers per firm. 3,827 Companies
employ 57,197 workers for an average of 15 workers per company. As would be expected, the
greatest number of firms operates in the tertiary sector irrespective of the type of firm. However it
may be noticed that while 17% of companies operate in the secondary sector, the relative figure for
SO/P is 11%.

Paul A. Borġ B.A. (Hons) Econ. Dip. Lab. Stud. , 2008

Unit 4: Types of Business Organisations – Text (2010 Ed.) Page 10 of 10