Business organization

Abdulla Afeef
Diploma in Human Resource
Management

MI Collage
Business Organization
An organization or economic system where goods
and services are exchanged for one another or for
money.
Types of business

• Public sector business is owned and run by the government

• Private sector business are owned and run by private

individual

• Sole Trader
• Partnership
• Corporation
• Co-operative society
Sole Trader
• Sole Trader is a business owned by only
one person.

Advantages
• few legal formalities.
• owner is his own boss, and has total control over the
business.
• owner gets 100% of profits.
• owner has freedom to change working hours
• Personally contact with customers.
• Does not have to share information with anyone
Disadvantages of a Sole Trader
• Nobody to discuss about the business.
• Unlimited liability.
• Limited finance.
• The owner normally spends long hours working.
• lack of specialists.
• not benefit from economies of scale.
Partnership
• partnership is a business owned by 2 - 20 persons who
contribute resources into the entity

Advantages of a Partnership
• More capital than a sole trader.
• Responsibilities are split.
• Any losses are shared between partners.
• Ease of establishment
Disadvantages of Partnership
• Unlimited liability.
• Partners can disagree on decisions
• slowing down decision making.
• one partner is inefficient or dishonest, everybody loses.
• Limited capital
• limit of 20 people for any partnership.
Corporation
• Corporation is a business organization that has a
separate legal personality from its owners.
• Ownership in a stock corporation is represented by
shares of stock.

Advantages of a Corporation

• Shareholders have limited liability.

• Ownership is transferable
Corporations can raise additional funds through the
sale of stock.
• Corporation has separate legal entity
Disadvantages of a Corporation

• process of incorporation requires more time and money

than other forms of organization.
• monitored by state and some local agencies, and as a
result may have more paperwork to comply with
regulations.
• higher overall taxes.
• conflict between shareholders and directors.
Co-operative Society

• co-operative organisation is defined as a form

of organisation where in person voluntarily
associate together as human being on the basis
of equality for economic interests for
themselves.
Advantages of a Co-operative Society

• easily formed.
• liability of each member is limited.
• overhead costs are comparatively low.
• co-operative society has a long life.
• membership of a co-operative society is open to all
members of the public.
• to help the poor and middle-income people.
Disadvantages
• limited capital only from the members.
• not possible to maintain secrecy.
• lack of motivation in a co-operative society.
• The shares of co-operative society are not freely
transferable
• Political Interference is very high.
• The members are often not loyal to their cooperatives.
Comparison Table
characteristics Sole Trader Partnership Corporation Co-operative
Society

Formation Easy to form Need to fill Need to fill Easy to form

documentation documentation

Ownership Owner(single) Partner(2-20) Shareholders (2-50) Members (At least

10)

Operate By the owner By the board of By the board of By the board of

directors appointed directors appointed directors elected
from the partners from the from the members
shareholders

Allocation of profit 100% to owner Profit has to share Profit has to share Non-profit
among the partners among the organisation
shareholders

Liability Unlimited liability Unlimited liability Members are not Limited liability
liable for the debt of
the company
Conclusion
• Each has different level of liability, risk and benefits.

• There are different people who start business for

different purposes.

• sole trade is the most popular way of starting a new

business, especially common amongst those going in to
business on their own for the first time.

• Establishing a sole trade is cheap and relatively

uncomplicated.