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Forms of Business Organization-

Private Limited Company
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By,
Leena,Sowmya,Harita,Sa
i
Sreedhar,Abhinandan,Su
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Business Activity Goods & Services

 Any activity which results in the provision of goods/services which

satisfy human wants

Capital
Wants Needs Goods

Consumer
Durable Non-Durable Goods
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Terms

 Production: refers to the making of goods to be sold or move to the

next stage

 Consumption: refers to the purchasing of goods/services

 Needs: essential for survival

 Wants: what people demand after needs are satisfied

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Wealth Creation

 The 4 Factors of Production are combined together to produce an

output
 Land – natural resources
 Labour – workforce
 Capital – equipment and money invested
 Enterprise – the entrepreneur (more later)

 At each stage of production value is added with each new ingredient

therefore wealth is created

 Goods/Services are then sold in markets.

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Business Activity

External Influences
eg Government Policy

Marketing Finance

Inputs
Land The Output
Goods
Labour Organisation
and
Capital (Internal) Services
Enterprise
People
Production
(Human
(Operations)
Resources)

External Influences
eg Competition
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The Cycle of Business

WANTS

IDENTIFICATION

PRODUCTION

CONSUMPTION
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Sectors of Industrial Activity

Sector Description Example

Primary Extracting materials Fishing, farming, coal
mining

Secondary Manufacturing Cars, computers and

cakes

Tertiary Provide a service Supermarkets, airlines,

accountants
+ Different Types of Business

Sole Traders

Partnerships
Private
Limited
Company
Types of Businesses (LTD)

Multinational Public Limited

Companies Company
(PLC)
Franchises

CLE
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Types of Business Organisations
(Private Sector) – Sole Trader
Ownership Size Objectives Finance
Individual • < 50 • Survive • Personal
employees • Make profit savings
• Quality • Overdrafts
product • Loans
• Grants
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Types of Business Organisations
(Private Sector) – Partnership
Ownership Size Objectives Finance
2-20 partners • Locally • Survive • Personal
• Nationally • Make profit savings
• Quality • Overdrafts
product • Loans
• Grants
• Partner
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Types of Business Organisations
(Private Sector) – Ltd
Ownership Size Objectives Finance
Shareholders • National Also: • Shares
(not publically •Strong brand • Banks loans
available) •High sales • Mortgages
•Growth • Government
grants
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Types of Business Organisations
(Private Sector) – Plc
Ownership Size Objectives Finance
Shareholders • >250 Also: Also:
(sold on stock employees •Market leader •Shares easily
•Social responsibility
exchange) • Often •Growth
sold on Stock
multinational •Maximise profits Market
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The Public Sector

 Managed by the government on behalf of the taxpayer who owns

them

 Funded through taxation

 Aims:
 Provide services
 Improve communities
 Act in best interests of society
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Private Limited Company (Ltd)

 Separate legal entity from owners.

 Shareholders are the owners – they buy shares in the company.

 Shares sold to a small group of people – not through the stock

exchange.

 The shareholders appoint directors to run the company.

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Private Limited Company

 A private limited company is one of the business

entities set up under the Companies Act 1956.
 As a corporate body, it has characteristics that
differentiate it from a sole proprietorship and
partnership. This is because a private limited
company is a legal entity and its identity is separate
from the identity of the company’s members.
 Objectives of Private Sector Business

Satisfying Profit
Environment Survival

Image and Share Price

Reputation
Objectives
Social Issues
Quality and
Innovation

Market Power
Efficiency
Sales and Sales
Revenue
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Characteristics of Private Limited
Company
Right and Responsibility
a.
• A company has a specific right and responsibility. It can acquire assets
under its own name. A company can also take legal action and face legal
action under its own name

b. Life Span
• The life span of a company is not dependent upon the death or resignation
of its members. A company can be dissolved when its members are no
longer interested in continuing the business

c. Liabilities
• The liabilities of the members in a company are limited to the total shares
contributed to the company’s capital. Personal assets are not affected
regardless of what happens to the company

d. Membership
• A company must have at least two members . These two members can act
as a director and founder of the company. The members of the company
will appoint the Board of Directors who will manage and run the business
operation subject to the Companies Act 1956
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Terms & Conditions of Private
Limited Company
a. The number of members does not exceed 50 people;
b. It has specific authority to transfer ownership of
members’ shares with the approval of the company’s
Board of Directors;
c. A company is not allowed to offer or sell any share or
debenture to the general public;
d. A company is not allowed to offer the general public to
deposit money within a stipulated time frame;
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Requirements of A Private Limited
Company
a. Memorandum of Association

b. Articles of Association

c. The Share Capital of a Company

a. Authorized capital
b. Paid-up capital

d. Members of Shareholders

e. Board of Directors

f. Company Secretary

g. Auditors

h. Registered Office

i. Company Seal

j. Authorization Letter
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Advantages of Private Limited
Company
Funds are easy to acquire through the exchange of share ownership or
a.
loan from a financial institution.
b. All shareholders are legally protected by law.
c. Shareholders are not burdened with the management of the business
because the responsibility to manage and run the business is held by the
Board of Directors, who are appointed by the company’s shareholders.
d. The liabilities of the company’s members are limited to the capital that
they contribute to the company. Shareholders’ personal assets are not
affected.
e. The life span of the business is not dependent upon the age or
resignation of its members.
f. It has greater potential for expansion.
g. Legally, the company is one business entity by itself
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Private Limited Company:
Advantages
 Shares can be sold to a large number of people.

 Limited liability – shareholders are not personally responsible for the

debts of the business.

 The main shareholders can keep relative control of the company.

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Disadvantages of Private Limited
Company
 A Private Limited Company is subject to more rules and regulations
compared with a Sole Proprietorship or Partnership. A company
must always abide by the rules and fulfil the terms set by
Companies Act,1956
a. The company’s shares cannot be transacted through the share
market.
b. The company must pay corporate tax.
c. The qualified Auditors must audit the company’s yearly financial
statement and the statement must be complete and regularly
updated.
d. The financial affairs of the company must be made transparent to
the general
e. The cost of setting up a company is high
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Private Limited Company:
Disadvantages
 Significant legal requirements when setting up.
 Shares cannot be sold / transferred without the agreement of other
shareholders.
 Accounts are much less private than sole trader / partnership.
 Cannot sell shares on stock exchange – limits expansion.
 Types of Businesses

5% 3%
20%

72%

Proprietorship Corporation Partnership Other

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Voluntary Organisations

 Managed and run by volunteers: 2%

5%
 no financial gain 8%

 they usually have an interest in the organisation

 Examples: 85%
 Scouts
 Girl Guides
 Youth and Sports Clubs

 Finance
 Donations
 Membership fees
Proprietorship Corporation Partnership Other
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THANK YOU
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QUERIES & SUGGESTIONS PLEASE