LO1 EXPLAIN THE DIFFERENT TYPES, SIZE AND SCOPE OF

ORGANISATIONS

Profit and non-profit organizations

Organizations are groups or entities formed with the intention of attaining specific aims or goals. Various
kinds of companies exist in today's marketplace, each created to fulfil a certain function and to suit the
demands of the communities it serves. Examining an organization's goals and objective is the most
typical technique to discern among them. Certain corporations exist to make a profit, while others exist
to advance a charitable movement or to improve society's well-being. It is feasible to distinguish in
between profit, non-profit, and non-governmental organizations based on the facts (NGOs).

Profit Organizations

A for profit entity is defined as a company, business, or organization that was founded with the main
goal of making money. These institutions are often private market, meaning they are owned by people
or groups of persons rather than the state or nation, and are known to as companies. This will not,
nevertheless, imply that such associations are not subject to government regulation. They are bound by
the legal and economic framework established by the appropriate public officials. Based on the
particular form of the company, the money created by such entities is frequently re-invested into the
industry to achieve its survival, and the leftover earnings are dispersed among the new investments
and/or stockholders. Their businesses may be found in a variety of industries, such as design,
electronics, cuisine, and retailing.

Non-Profit Organizations

Not-for-profit entities are ones that are formed for reasons apart from profit. These groups are
distinguished from for-profit associations by the fact that their prime objective is to serve the public
good rather than to produce personal enterprise for company owners. Charity and humanitarian
businesses are institutions that come under the not-for-profit category. Even though some of these
groups engage in commercial activity, the revenues gained are utilized to advance the causes they
support, and earnings are never dispersed to its participants. Not-for-profit groups are normally tax-
exempt and rely on contributions, endorsements, and other offers provided to support their operations.
Typically, they work in the spiritual, medical, or instructional fields.

NGOS (Non-Governmental Organizations)

Non-governmental organizations, or NGOs, are non-profit institutions that operate autonomously of the
state or the nation. NGOs function outside official participation, despite the fact that they may receive
governmental money. Operational NGOs and advocacy NGOs are the two types of NGOs described by
the World Bank. Advocacy NGOs work to promote a certain cause, while operational NGOs seek to
design and implement development-based programmes. Within each category, many types of NGOs
may exist.
Business Enterprises (SMES)
As previously said, not all businesses are run for profit. Organizations (or enterprises) founded with the
main purpose of profit generating, on the other hand, do not have to be massive international firms with
a large staff. They come in many sizes: micro, small, medium, and giant. The number of staff, proprietors
and/or shareholders, share of the market (i.e. their fraction of overall market sales in the manufacturing
experience), and legal recognition are the differentiating elements between various sorts of enterprises.
Each firm must choose a legislative framework since it will have a significant impact on how the
company performs, generates funds, and distributes earnings. A firm can use a variety of legal forms,
however the ones most commonly used by SMEs are sole proprietorships, partnership, and private
limited corporations.

Sole proprietorship

A sole proprietorship (also known as a self-employed person) is a legal institution in which a single
individual owns and controls a firm. Because the proprietor of a firm is not legally separated from it, he
or she is individually responsible for all components of the company, especially money. Any earnings
earned by the firm belong to the owner, but all obligations incurred by the company are also the boss's
individual accountability. Since there is no legal separation between both the owner and the corporate
entity, the sole proprietor and unlimitedly liable for losses or obligations incurred by the firm, and may
be forced to satisfy them using his as well as her own private money or resources. Sole traders can hire
employees, but the primary decision for the business rests with the owner.

Sole traders are simple to establish and often need only a minimal original investment. During the early
stages of their business, it is customary for SMEs to operate as sole ownership. Due to the tiny size of
the firm, overheads are normally low, but if the company is still unable to earn a profit and continues to
accrue debt, the proprietor is solely responsible for any remaining obligations.

Partnerships

Partnerships are companies that are held by 2 or more persons. A partnership agreement governs the
members' connection and clearly defines the structure of the partnership. The agreement of
collaboration will also describe the partners' responsibilities, how earnings will be dispersed, each
partner's investing requirements, and how liabilities would be shared. Partnerships, like sole
proprietorships, have limitless liability, which implies that the members are individually accountable for
the business's obligations. The personal responsibility of each partner towards the debts will be
specified in the partnership document. As a small business grows, some sole proprietorships may elect
to transition to a partnership arrangement. This has the added benefit of allowing associates to share
responsibilities, which is impossible in a sole proprietorship.

It's worth noting that not all collaborations come with limitless liability. LLPs (limited liability
partnerships) are growing more popular. All of those are collaborations in which the members'
responsibility is restricted, meaning that one partner is not liable for the carelessness of the others.
Limited partners may therefore give up their right to participate in some areas of decision-making in
exchange for limited liability for the company's obligations. LLPs are widely used by legal firms, doctors,
and other professionals-based businesses.
Limited Companies

Limited corporations are registered, which implies they are different from their proprietors and have
their very own legal status. Limited corporations in the United Kingdom are formed as a 'legal adult' at
Limited Companies, where they are given a distinctive corporate number. When a company is formed, it
must have a constitution that governs the interaction between the shareholders. A firm can possess
assets in its own name, engage into contracts, and sue or be sued since it is a separate legal entity. Legal
structure protects the owners, which means they are only liable for business obligations up to the
amount of their original investment. Stocks or guarantees can be used to limit the size of a company.
Stockholders' own businesses that are restricted by stocks, and their financial liability is dependent on
the amount and price of the stock they possess. Restricted-by-guarantee businesses are characterized
by persons known as "guarantors," for whom the responsibility is limited to a specific sum known as the
"guarantee," that must be paid if the business fails to pay back the loans. Non-profit organizations are
normally limited by guarantee, while for-profit organizations are usually restricted by shares. Private and
public limited firms are the two primary types of limited companies.

Private Limited Companies

Small individually held businesses with limited by guarantee are commonly known as private limited
corporations. Since the company is tiny and privately owned, it can only have a restricted number of
stockholders (for e.g., 50 shareholders in the UK). Furthermore, privately owned corporations are unable
to list their securities to the public since the stocks are not publicly listed. There is no statutory
requirement for forming a private limited company in the United Kingdom, save that at least one share
must be issued at the time of registration. Many SMEs choose to operate as a private limited company
because it protects them from personally liable and reduces risk.

Public Limited Companies

Limited liability businesses (LLCs) that can openly offer and exchange their securities to the public are
known as public limited corporations (PLCs). PLCs, unlike private limited corporations, must have a
minimum paid - up capital. They must therefore directly employ directors and a secretary of the
company, as well as file annualized accounts once a year. In the United Kingdom, a PLC could never
trade its stocks without first obtaining a trading certificate from Companies House, and it must also
include the word "PLC" in its name. Common shareholders (which have no particular rights or limits),
preferred stock (which would have the right to preference distribution on yearly dividends), and
redeemable shares are all examples of PLC shares (allowing the company to buy back the shares after a
certain period). The opportunity to obtain funds via the public sale of shares is a major benefit of
forming a PLC. However, the expense of forming a PLC may be prohibitive for small enterprises that are
having difficulty raising funds elsewhere.
References

https://www.habitatbroward.org/differences-between-for-profit-and-nonprofit-organizations/

https://www.rifkindpatrick.com/Blog/2015/November/The-4-Major-Business-Organization-
Forms.aspx#:~:text=There%20are%204%20main%20types,the%20scope%20of%20business%20law.