ORGANISATION OF BUSINESS

A business organization is a single individual or group of persons who have pooled their
resources in order to provide goods & services to make a profit.

A business organization is also known as a Unit of Management.

There are several types of business organization:

1. Sole Trader
2. Partnership
3. Co-operatives
4. Private Ltd. Company
5. Public Ltd Company
6. Conglomerates
7. Multinationals
8. Nationalised Companies
9. Government & local authorities.

When you start a business, you run the risk of making a loss. If this happens continually, you
can become bankrupt (insolvent). You may then have to liquidate. That is selling off your
assets to repay your debts.

LIMITED LIABILITY

This means that legally the owners of the business only lose what they have already invested if
it goes bankrupt. (We say that the owners are only liable for debts up to what they have
invested.)

This is the case with any business in which the owners have bought shares to join.

UNLIMITED LIABILITY

The owners are liable for all debts. In other words, if the business goes bankrupt, they have to
repay all debts from their own pockets.
 1. SOLE TRADER
 There is only one owner who is also the manager.
 It is also called a Sole Proprietor.
 It is financed by the owner.
 It is the most common form of business.
 Egs. Doubles vendor, taxi driver, nuts vendor, private doctors, parlour, mini- mart.
ADVANTAGES DISADVANTAGES

1. It is easy, inexpensive & quick to The owner has unlimited liability.

form.
2. All the profits belong to him. He assumes all the risks & losses
himself.
3. He makes decisions quickly because It is difficult for him to get a bank loan.
there is no one to consult.
4. He accounts only to himself. He has long working hours.

5. He can have a close relationship If he dies so does the business.

with his customers.

2. PARTNERSHIP
 It consists of 2 to 20 partners.
 It is formed by a Deed of Partnership (A document stating the no. of partners, the
salary of each partner, the amount of money each partner puts in, the liability of
each partner etc.)
 TYPES OF PARTNERS
A) LIMITED PARTNERS – They have Limited Liability (at least one partner will
have unlimited liability)
B) SILENT PARTNERS – These contribute capital to the business but do not
get involved in running the business.

ADVANTAGES DISADVANTAGES
 1. It is easy to form. There is still unlimited liability.
2. It can raise more capital than a sole There is still not much capital.
trader.
3. Partners share the workload. Partners may disagree.
4. Each partner can specialize in his If one partner makes a mistake, the
field to help manage the business. others also lose out.
5. There is close contact with
employees & customers.
6. It can grow into a larger
organization.

3. CO-OPERATIVES
 It consists of several members. (shareholders)
 To become a member you must buy shares. (very cheaply)
 Members vote for a Board of Management.
 Members are usually in the same trade or have some similar interest.
PRINCIPLES OF CO-OPERATIVES

a) Open Membership – Anyone over 16 years by buying shares.

b) Democratic Controls – Members have the right to vote at a General
Meeting for a committee to run the business.
c) Limited Interest on Capital Invested – The money paid for shares is
used to run the business & they get a low rate of interest in return.
d) Distribution of Profits – All profits are shared to members fairly. Also it
is used to provide services for members like health care & education.
TYPES OF CO-OPERATIVES

1. Consumer Co-operative 2. Producer Co-operative

3. Financial Co-operative 4. Worker Co-operative

5. Services Co-operative

ADVANTAGES DISADVANTAGES
1. There is no profiteering. Capital is limited.
2. It is democratic. Management is inexperienced.
3. It creates employment. There may be conflict among
members.
4. There is little or no advertising cost.
5. It looks after the interests of
members.
 JOINT STOCK COMPANIES

This refers to any company that sells shares (stock) and therefore has limited liability. People
who buy shares are called shareholders. They are the owners of the company. There can be
millions of them. They have all contributed to a joint stock of capital but they play no part in
running the company. This type of company is considered to be a legal person. (It can be sued
in court.) They hire professional directors to run the company for them.

Egs. of joint stock companies – Private Limited Companies, Public Limited Companies (PLCs).

A Joint Stock Company must have certain information to be formed.

1. A Memorandum of Association – The name of the co., its objectives, a declaration of limited
liability etc. (It governs the external relationships of the firm.)
2. Articles of Association – The rights of shareholders, how shares are transferred, how
directors are elected etc. (It governs the internal relationships of the firm.)
These 2 documents must be filed at the Registrar of Companies who will then issue a
CERTIFICATE OF INCORPORATION.

3. PRIVATE LIMITED COMPANIES

 It consists of 2 to 50 shareholders (owners)

 It is usually owned by family & close friends
 Two documents are used to form a private ltd. Company
 A Memorandum of Association – outlining the external relationships of the firm.
 Articles of Association – outlining the internal relationships of the firm.
Accounts must be properly kept for tax purposes.

Directors are usually elected at an Annual General Meeting (AGM)

It is a legal person or entity.

ADVANTAGES DISADVANTAGES
1. There is privacy. There is still not much capital.
2. There is limited liability. Development is slow.
3. Specialists can be hired. They cannot sell their shares without
permission from the director.
4. If one shareholder dies, the The management experience is limited
company can still go on. to family & close friends.
 4. PUBLIC LIMITED COMPANIES

 It is a joint stock company.

 It is different from a private limited company because it sells shares to the public over
the stock exchange.
 It can start with 2 shareholders & can go up to any amount.
 It must have the letters PLC after its name.
 It is formed by Memorandum & Articles of Association.

ADVANTAGES DISADVANTAGES
1. There is a lot of capital for The objectives of managers may be
expansion. different from those of the owners.
2. There is limited liability. It may become too large and make
losses.
3. Specialists are hired to help manage Workers feel left out of decision
the company. making.
4. Risk is spread over many Accounts must be inspected annually.
shareholders.

5. CONGLOMERATES
A conglomerate is a group of companies each operating in different industries & sectors. Eg.
Tourism, transport, oil exploration, construction.

Egs. of Conglomerates – Ansa Mc Al Group of Companies in T&T

Grace Kennedy & Company in Jamaica

ADVANTAGES
1. There is strength & security in
numbers, so risk of failure is spread.
2. Companies can share resources
leading to economies of scale
3. There is much interaction among
workers (staffing, job openings,
promotions etc.)
DISADVANTAGES
Some managers dislike control outside
their own company.
Because the group is so diverse,
analysis of accounts is more difficult.
There may be conflict among different
managers.

6.
 MULTINATIONALS
 A multinational firm is one which owns, controls & operates enterprises in several
countries at the same time.
 The firm does this in order to increase its market share (no. of customers) & increase
overall profits.
 The parent (main) company makes all the decisions which are carried out by the
management of the subsidiary companies.(other branches)
 Multinationals account for most of the trade in manufactured (secondary) goods in the
developed world.
 Egs. in the Caribbean – Nestle, Cable & Wireless, British Petroleum, Mittal Steel, British
Gas, Power Gen, Atlantic LNG etc.

ADVANTAGES DISADVANTAGES
1. They create employment. They may harm the environment.
2. They encourage positive work They may change the culture of the
ethics. country.
4. They provide much needed They extract raw materials but do not
investment in the Caribbean. add value locally.
5. They are a good source of tax, They transfer profits to home
revenue & foreign exchange. countries.

7. FRANCHISE

A franchise is a right sold by a person or firm (franchiser) to another person or firm

(franchisee) which allows the franchisee to make a profit by selling goods carrying the
franchiser’s name.

 The franchiser’s reputation is very important when they allow this sort of transaction.
 This type of co-operation between large firms & sole proprietors exists mainly in fast
food business.
 The franchiser is paid a lump sum (rent) & a share of the profits (royalties).
 The franchisee uses the franchiser’s advertising etc. to gain sales.
 Egs. KFC, Pizza Hut, McDonald’s, Subway etc.
8.
 PUBLIC ENTERPRISES
These refer to companies owned by the state on behalf of the population. There are 2 main
types:

a) Municipal or Local Authorities

b) Nationalised Industries (State Corporations)
MUNICIPAL OR LOCAL AUTHORITIES

A local or municipal authority is set up by an Act of Parliament to take care of local community
concerns. They sometimes take the form of Borough or County Councils and look after water
supply, drainage, sports facilities, garbage disposal & health services.

 Each council is headed by a chairman or mayor

 They carry out their activities with grants from the gov’t as well as from collecting local
taxes eg. House & land tax.

NATIONALISED INDUSTRIES (STATE CORPORATIONS)

They are also called public corporations ( Not the same as Public Ltd. Companies).

 There are no shareholders, it is owned by the state on behalf of the population.

 It is managed by a Board of managers appointed by the state.
 A Minister of gov’t is the person at the top.
 They get long term loans from the gov’t.
 They have to publish their accounts which are reviewed by parliament
 The main aim is not profit but to benefit the public & at least break even.
Egs. WASA, TSTT, PTSC, T&TEC.

ADVANTAGES DISADVANTAGES
1. They provide vital services at Losses are paid by the tax payers.
reasonable prices eg. water,
electricity, postal services.
2. They provide employment. Usually they don’t run efficiently due to
political interference.
3. They have better regard for the Too much ‘red tape’
environment & working conditions
of workers.
THE PRIVATE SECTOR – Refers to all businesses owned & run privately (i.e. not by the
gov’t)

Egs. sole trader, partnership, co-operative, private ltd. company, public ltd. company,
multinational, franchise etc.

REASONS FOR SETTING UP A BUSINESS

1. To earn an income
2. To provide goods & services for the community.
3. To provide employment in the community
4. To get the satisfaction of being your own boss.
5. To support social & cultural activities in the community.
6. To create a good image in the business world.

THE PUBLIC SECTOR – refers to all businesses owned & run by the state (gov’t) on behalf of
the population.

DIFFERENCES BETWEEN THE PUBLIC SECTOR & PRIVATE SECTOR

PUBLIC SECTOR PRIVATE SECTOR

1. It is owned & run by the state It is owned & run privately.
2. It exists mainly for the welfare of the It exists mainly to make a profit.
population.
3. It is financed by tax revenue. It is financed by personal savings, share
capital or loan capital.
4. It tries to create employment. They try to cut costs.