Task 2

TASK 2
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Table of Contents
How Business organizations are legally formed........................................................................2
2. Private sector Businesses.......................................................................................................2
a. Sole Trader..........................................................................................................................2
b. Partnership..........................................................................................................................2
c. Private Limited Company...................................................................................................3
d. Public Limited Company....................................................................................................3
e. Cooperatives.......................................................................................................................4
3. Public Sector Enterprises....................................................................................................4
a. Public corporation...............................................................................................................4
b. Municipal enterprises..........................................................................................................5
c. Critical Evaluation of formation of different business organizations.................................5
Reference List............................................................................................................................6
How Business organizations are legally formed
The corporate functioning is significantly impacted by the corporate structure it employs.
There are variety of organisations, each of which offers its own unique set of benefits and
drawbacks, including convenience and higher of formation, continuing maintenance needs,
disintegration and systems in place, financing, management structures, common control,
limited partnership, and financial reporting. The kind of company that has been run—whether
it be commercial gain, not for financial gain, or even as a brand very little bearing on the kind
of corporate structure that has been used to run the firm. As per law dictates businesses as
legally distinct bodies, which are treated similarly to people for the determining legal
protections. Several different types of commercial organisations assume this structure.
Sole proprietorships; partnerships; limited liability companies; corporations, and cooperatives
make up majority of all existing forms of corporate structures.
2. Private sector Businesses

Businesses’ regulatory form, often referred to corporate corporation are based on regulatory
division which governs some parts of an organisation. Company's taxable income at the state
level is directly related to its corporate legislative framework. It is possible for this to have
legal repercussions at certain administrative levels.
a. Sole Trader
Basic kind of company organisation can be seen as sole proprietorship. Single individual gets
held accountable about conclusive firm ’s earnings & liabilities when the business is
organised in form of sole proprietorship. The expenses of becoming a proprietor differ from
industry to industry. In speaking, initial expenditures would governmental fees, taxation,
rentals for office supplies and meeting rooms, fees charged by banks, and any technical
services that a company hires. In sole proprietorship, all gains go to trader, and they are only
subject to taxation once. The owner is in charge of everything and has full decision-making
authority over the business. Organizing a firm under this type of organization is simplest and
least costly option available.
One of the most significant disadvantages of operating a business as a sole proprietor is that
one can undergo take on infinite accountability for any problems that arise inside the
company. Proprietor's own resources are at danger.A ability to raise capital is constrained
besides the owner can be forced to resort to personal borrowing. Such structure lacks distinct
legal standing for this [1].
b. Partnership
A partnership is an economic entity that may be held by more than one person. It consists of
different kinds: a regular partnership, in which everything is split fifty-fifty, and a limited
partnership, in which single partner makes management of business's day-to-day activities as
well as the other individual/ individuals contribute to the business and earn
siginficant proceeds. Partnership is simple to set up, with the exception of drafting an
agreement for the partnership. Because of its distinct legal position, it is protected from
responsibility. One taxation of the profit is all that is required, and partners would provide
complementing core competencies. In partnership all partners are independently and
collaboratively responsible about acts of other members in the partnership. It is expected that
the owners will get part of the proceeds. If there is not a formal partnership contractual
arrangement, corporate governance is going to be split, and the business would suffer as a
result.
c. Private Limited Company

A composite business form known as Private Limited Company provides its members
and shareholders with option of minimising their personal responsibility while still benefiting
from the taxation, mobility advantages of a partnership. Shareholders of a private limited
company are protected from individual accountability for the obligations of business as long
as it is not possible for establishing that they carried out the operations of an entity in a way
that was either careless or unlawful, so causing harm for an individual. This is prevalent form
of company organisation and was designed from the ground up for very small companies. It
is a distinct entity in the eyes of the law. There is no restriction on the number of members
a Private Limited Company may have. Incorporating private limited company can be an
expensive endeavour. It needs fees to be incurred on an annual basis for administration.
An individual tax obligation exists for members of a private limited company. When forming
a private limited company, it is suggested to get financial & tax guidance.
d. Public Limited Company

A public limited company is a voluntary organisation of individuals which is registered
and resultantly gets distinct legal personality and the responsibility of whose shareholders is
restricted.Public limited corporations are required to be placed on a sharemarket in order to
facilitate public trading of their assets and stocks. A public limited company is a kind of
commercial organisation which functions being an independent legal entity from its owners.
This type of corporation may be owned by several people. Investors first organised such
entity and then get shares. There is no restriction placed on the listing or trading of a
publically traded companies' equity on a securities exchange. The maximum quantity of
funds that stakeholders of a public limited company may forfeit is the sum initially paid for
the stock that they now possess [2].
When the firm is publicly traded, it is required to establish an executive board that includes
representatives from the majority shareholders most influential investors. Beginning a Public
Limited Company is often a difficult and time-consuming endeavour. The word public should
be interpreted in its traditional sense in this context. When a company becomes publicly
traded, its operations are subject to scrutiny from the general populace.
e. Cooperatives
Cooperatives can be referred as people-focused businesses that would be managed by
respective citizens, governed by those customers, administered by their members for the
purpose of realising their representatives' equitable socioeconomic or intellectual ambitions.
Individuals are expected to do it in a setting that is liberal and egalitarian via the use of
unions. The principle should govern democratic governance in organizations applies equally
to all types of individuals, including inhabitants, consumers, workers, and users. No of how
much money a member has invested in the business, they all have an ultimate
say in decisions are made. Coops over globe have been encouraging students to develop and
implement innovative business models which provide protracted employment besides wealth
by placing an emphasis on values of transparency, tolerance, and egalitarianism at the core of
the operation of the business. Individuals are able to gain their economic destiny via the
formation of cooperation, and since these businesses are not associated with company, the
financial and social advantages that result from their operations are retained in the areas in
which they are founded. Revenues that are made will put back into business or distributed
among organisational members [3].
3. Public Sector Enterprises

A public enterprise is each and every industrial venture whom the state controls and governs
having vision to promote people's benefits and preserve the national good, that is a
description that is generally recognised and widely used. They operate underneath the direct
supervision of a state. Some of them are even constituted in accordance with legislation and
the Corporations Act. As a result, the character of major corporations may be classified as
either independent and quasi. Whichever the County or the Federal level may manage a
public sector firm. Starting a public business with the intention of providing service to the
general populace is the primary reason for doing so. They can deliver critical goods/services
at competitive costs and also generate job possibilities. One of the goals of a public
corporation is to provide service to all segments of the local population.
a. Public corporation
Public corporation is a kind of public organization that would be established as an
independent entity via passage of a specific Act by either the National Legislature or one
by Legislative Bodies. Statutory organization is another name for a public company since a
legislation is what first establishes it as a legal entity. A specific Act of either the Legislative
enactment is required in order to establish a public company. That Act lays out its authorities,
as well as its goals, duties along relationships with both the Department of the Interior as well
as Parliament. A public company receives its funding, known as assets, either directly
and indirectly from the state or through organizations under its direct or indirect authority.
Nevertheless, a large number of publicly traded companies also had started raising funds via
the equity market. A public company is exempt from the authority of the state, which allows
it to enjoy the benefits of operational management independence. Therefore, it is possible to
conduct itself in a businesslike way. The executive team has the ability to make risky choices
that include conducting experiments inside the company's many areas of company in order to
make the most of available opportunities.
b. Municipal enterprises
A municipality business is corporation that is entirely controlled besides managed by the
state of a community.Publically owned firms are expanding all throughout globe as capital
councils see their potential to increase income and improve decent employment in the city's
community. Because of the existence of local firms, earnings of average community
is subject to the vagaries of the corporate companies, which may lead to an improvement in
the sustainability of the city's economy.
The public ownership of these bodies not only makes it possible to pursue societal,
financial and ecological results that go beneath the wealth maximization but it also stimulates
the fulfilment of requirements which the market would overlook. Since municipality
companies are run by the government and are governed by city leaders who are responsible
to citizens of region, organizations have incentive to deliver services that are both high
standard and inexpensive.
In order to become successful on a larger scale, municipal firms need to dispel the
widespread belief that common ownership is necessarily expensive and burdensome in
nature. It will take a considerable amount of education to change the minds of people who
have held these misconceptions for a very long time, despite the fact that information and
encounter from the actual life strongly refute such preconceptions and prove ability to
generate a range of beneficial rewards for the society [4].
c. Critical Evaluation of formation of

different business organizations
Majority of experts and policymakers are of opinion that world economy serves as a crucial
mooring point for social culture and values. The flourishing of entrepreneurial is made
possible by private business and the success of business. This, in turn, contributes to
economic growth and world peace. The success of businesses can be traced back to the legal
framework, which is highly adaptable and simple to navigate. This provides owners of
companies with a variety of alternatives from which to choose when deciding how to
structure their operations. In spite of the benefits of independence and a low barrier to entry,
running a firm as a sole proprietorship, wherein the owner is responsible for all financial
obligations, is very risky. The general partnership not only enables business partners to
engage in commercial activity jointly but also subjects them to limitless responsibility.
However, managing a company may be difficult and time-consuming due to the extensive
specific specifications involved in both its formation and continuing operations. However,
corporations provide their owners the benefit of restricted responsibility. When it comes to
conducting business, limited liability structures, such as limited liability companies and
limited liability partnerships, provide the greatest degree of adaptability, as well as many
opportunities for effective tax management and minimal personal responsibility for its
members.
Reference List:
1. KCSourceLink (2018). What Are the Forms of Business Organization | KCSourceLink.

[online] KCSourceLink. Available at: https://www.kcsourcelink.com/guides/start-a-
business/register- and-license-your-business/forms-of-business-organization.
2. iEduNote.com. (2020). Public Limited Company: Definition, Features,

Advantages, Disadvantages. [online] Available at:
https://www.iedunote.com/public-limited- company#:~:text=A%20public
%20limited%20company%20is.
3. ICA. 2022. What is a cooperative? | ICA. [online] Available at:

https://www.ica.coop/en/cooperatives/what-is-a-cooperative
4. TheNextSystem.org. 2022. Municipal enterprise. [online] Available

at: https://thenextsystem.org/learn/stories/municipal-enterprise

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2. Private sector Businesses

c. Private Limited Company

d. Public Limited Company

3. Public Sector Enterprises

c. Critical Evaluation of formation of

1. KCSourceLink (2018). What Are the Forms of Business Organization | KCSourceLink.

2. iEduNote.com. (2020). Public Limited Company: Definition, Features,

3. ICA. 2022. What is a cooperative? | ICA. [online] Available at:

4. TheNextSystem.org. 2022. Municipal enterprise. [online] Available

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