TYPES OF BUSINESS

ORGANIZATIONS

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 WHAT’S THE DIFFERENCE
BETWEEN THE PRIVATE AND
PUBLIC SECTOR?

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 Types of
Organizations

Public
Private Sector
Sector

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 The Private Sector is made up of
companies owned and run by private
individuals or groups of individuals.
Their main aim is profit making.

PRIVATE SECTOR

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PUBLIC SECTOR

The Public Sector is made up of companies owned and run by the

government. Their main aim is not profit making but providing a good
or service for the benefit of all citizens.

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 Liability

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 Limited liability

Liability is something that you owe.

Limited liability means you cannot lose more than you invest if a business fails
Personal assets cannot be seized to repay debts in the event of losses.

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 Unlimited liability

Unlimited liability means you can lose

everything that you own – your house,
land, car – if your business fails
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 PRIVATE SECTOR

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 Sole Trader

Partnership

Private Limited Company

Public Limited Company

Franchise

Multinational Company

Co-operatives

Conglomerates

Joint Ventures
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 Sole Trader

A sole trader is also called a sole proprietor.

It is the oldest, most common and simplest
form of businesses.
It is owned and operated by ONE individual.
Sole traders are small businesses with few
employees.

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 Sole Trader

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 Advantages of sole trader
It is easy to set up. There are few legal formalities.

Owner has complete control and can make all decisions on his
own
All profits belong to the owner
 
The owner chooses his own hours of work

Can establish close ties with customers

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 Disadvantages of sole trader
There is unlimited liability (personal assets are seized to repay
debts if owner goes bankrupt)

It is difficult to raise finance or capital as sole traders own few

assets
Competition from bigger firms
Lack of continuity: if the owner dies, the business ends

Long hours of work are necessary to make the business succeed

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 SUITABILITY OF SOLE
PROPRIETORS

For business where capital required is small and risk

involvement is not heavy, this type of firm is suitable.

It is also considered suitable for the production of goods which

involve manual skill e.g. handicrafts, jewelery, tailoring,
haircutting.
 Partnership

A Partnership is a legal relationship formed by the

agreement between two or more individuals to carry on a
business as co-owners.
(2 – 20 individuals)
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DEED OF PARTNERSHIP

This is drawn up to form a partnership.

This shows:
• the personal details of each partner
• the amount of capital contributed
• how profits should be shared
• the policy for admitting new partners
• how the partnership should be terminated.
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 Advantages of partnership
Work burden is shared among partners. No one person
has to do all on his own.
Capital is contributed by each partner
 
Losses are shared among partners
 
Partners may have different areas of expertise
 

There are fewer legal formalities than a company

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 Disadvantages of partnership
There is unlimited liability: partners’ assets may be seized to
repay debts
Profits are shared
If one partner makes a mistake, the partnership suffers

If one partner dies, the partnership is terminated

Disagreements among partners may be difficult to resolve

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 Company

A company is owned by shareholders who appoint

Directors to give direction to the business. The Chief
Executive is the senior official within the company with
responsibility for making major decisions.

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 Company

Legal personality is when a company is capable of having legal rights.

It is seen as separate from its owners.
A company is a legal body in its own right with an existence that is separate in law from
its owners.
The company can sue and be sued and own assets in its own name.

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 Company

Shareholders put funds into the company by buying shares.

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 Private Limited Company

This is a small to medium sized business that is owned by 1 – 50

shareholders. It is owned most times by relatives or close family.

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 Private Limited Company

Characteristics of a Private Limited Company

• Members of the public are not able to purchase shares.
• There is limited liability
• There must be proper keeping of records for tax purposes
• Directors are usually elected in an Annual General Meeting (AGM).
• A document called the Articles of Incorporation must be filed for owners to
legally set up a business. It states the name and purpose of organization
• It is common for private companies to include the words “..and Sons Ltd”
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 Advantages of private limited company

Shareholders have limited liability

 
Continuity is ensured- the death of the shareholder does not affect the
company

Privacy and control is retained by the owner

The company has separate legal personality

 

The company is able to raise capital from sale of shares to family and
friends

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 Disadvantages of private limited company

Shares cannot be transferred without the director’s consent

The amount of capital is limited to the contributions of 50

people
The entrepreneurial pool is restricted to family members and
close friends
Legal formalities are involved to set up the business

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 Public Limited Company

This is a company whose shares are openly sold on the stock exchange. It
must have the letters “PLC” written in the name. There is no limit to the
number of shareholders. There must be a minimum of 7 shareholders.

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 Advantages of public limited company
Shareholders have limited liability
Capital is raised easily by selling shares
 
Risk is spread over many shareholders
 
Specialist help is hired to run the company
 

The company has separate legal identity

 

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 Disadvantages of public limited company

The objectives of managers may be different from the

objectives of the shareholders

Accounts must be submitted annually. Information is made

public.

Legal formalities are involved in forming the company

Risks of takeover due to the availability of shares on the stock

exchange
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 Public Limited Company in T&T
Listed on the Stock Exchange

Angostura Holdings Limited

Scotiabank
Ansa McAl Limited
First Citizens Bank Sagicor
Guardian Holdings Limited Republic Financial Holdings
Massy Holdings Limited WITCO
PLIPDECO Trinidad Cement Limited
Prestige Holdings Limited Unilever

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 Conglomerate

This is a group of companies each operating in different industries and sectors

A conglomerate is a corporation made up of several different, independent businesses. In

a conglomerate, one company owns a controlling stake in smaller companies that each
conduct business operations separately

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 The Massy Group which has been in operation since
1923, is a diversified regional conglomerate with
operations throughout the Caribbean basin, Colombia
and South Florida. 
The Group, employs over 11,000 people in our retail,
distribution, automotive and industrial equipment,
energy and gas products, financial services and other
business sectors. With over 60 operating companies
across six business segments comprising Massy Holdings,
the Group can leverage significant synergies and deliver
greater growth and value for stakeholders. Massy is a
public company which is traded on the Trinidad &
Tobago Stock Exchange
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http://massygroup.com/about_us/
 Massy Group of Companies

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Massy Motors and Machines

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Massy Gas Products

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Massy Financial Services

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Massy Retail

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 Massy Strategic Investments

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With 73 companies spanning eight sectors in over
eight territories, and close to 6,000 employees,
ANSA McAL is the leading conglomerate in the
Caribbean region. Staying true to our founders’
values, we are committed to high standards and
sound business principals and practices. We
achieve exceptional performance and foster long-
term confidence and respect, while generating
sustained growth. As we push further to shape the
future, we remain conscious of our duty to serve and
strengthen the interests of our people, our country
and our Caribbean region.

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 Ansa McAl Group of Companies

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 Ansa McAl Group of Companies

Massy
MassyGroup
GroupofofCompanies
Companies
Beverage

Construction

Distribution
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 Ansa McAl Group of Companies

Guardian Media

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 Franchise

A franchise is a right sold by one person (called the franchiser) to

another (called the franchisee) which allows the franchisee to use
the name, logo and advertising of the franchiser.
The franchiser is paid an initial cost as well as yearly royalties.

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 Franchise

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 Franchise

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 Advantages of franchises
Low chance of failure as an established brand is
being used
Advice and training is offered by the franchiser
 

Individual branches do not need to advertise

Separately

Supplies are obtained from high quality

suppliers
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 Disadvantages of franchises
Fees/royalties have to be paid to the franchiser

Negative publicity of one branch may affect all

others

Strict rules over pricing and layout may reduce

owner’s control over the business

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 Multinational Companies (MNCs)

This is a firm which has its headquarters in one part of the

world and branches or subsidiaries elsewhere.

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 Multinational Companies (MNCs)

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 Advantages of MNC’s
They provide employment for citizens of the country

MNC’s bring in foreign expertise and technology to the host country

They are a valuable source of taxation to the government of the host

country
They allow access to new markets for a company’s products and
services
Competition is created which can lead local businesses to be more
competitive

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 Disadvantages of MNC’s
Their activities may change the culture of a country

Profits are transferred to the home country

The welfare of the economy is not of concern to a MNC

Local companies may suffer as MNC’s are larger and

mass produce items leading to lower costs per unit

MNC’s may use a country’s resources poorly leading to

their depletion
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 Cooperatives

This is an organization that is owned and

operated by its members who have similar
interests. Membership is gained by buying
shares. The members elect a board of
management which runs the business on
behalf of its members.
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 Cooperatives

Types of Co-operatives
- Consumer Co-operative: provides members with good and services
- Producer Co-operatives: all factors of production are pooled for the
common good of the producer. It is usually agricultural in nature.
- Financial Co-operative: Members pool savings in order to secure a low
credit for themselves, for example, credit unions
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 Cooperatives

Consumer Cooperative

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 Cooperatives

Producer Cooperative

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 Cooperatives

Financial Cooperatives

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 PUBLIC SECTOR

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 PUBLIC SECTOR

State Corporations/Nationalized Industries

Local and Municipal Authorities

Statutory Boards

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 State Corporations/Nationalized Industries

Called State corporations, nationalized industries or public

corporations. Profit making is not their major objective.
State corporations have no shareholders and are owned entirely by
the state on behalf of the country. The directors are appointed by the
government. Annual accounts have to be presented to the
government.

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 State Corporations/Nationalized Industries

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 Advantages of state corporations
Emphasis is placed on social objectives rather than profit making, for
example, protecting the environment, providing goods/services

Services that make a loss may still be kept operating if it benefits the
public
Governments provide most of the finance
 

They avoid wasteful distribution of services, for example, many

companies supplying water through different pipes

Important services are controlled by the government, not private

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investors
 Disadvantages of state corporations
Government may interfere in business decisions for political
reasons

Losses made must be subsidized by the taxpayer

Government involvement may slow down decision making

Lack of profit motive can lead to inefficient operation

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 Local and Municipal Authorities

These are public sector bodies responsible for services to the local
community.
They are controlled by local government councillors who are elected by
voters.
They are responsible for road maintenance, garbage collection and
disposal, parks and gardens, cemeteries and other amenities like libraries
and public theatres.
Finance comes from government grants and charges from public parking,
entry into facilities and fees for stalls at marketplaces.
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 Local and Municipal Authorities

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 Statutory Boards

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TYPES OF BUSINESS ORGANIZATIONS
JUNE 2004

Carmen Martin is contemplating turning her mobile canteen into a full fast-food
restaurant. She is pondering whether to maintain the sole proprietorship she has,
whether she should organize the business as a partnership with two friends or form
a private limited company with them.

(a) Describe THREE features of each form of business Carmen is considering. (9

marks)
(b) Discuss TWO advantages and TWO disadvantages of organizing the restaurant
as a limited company rather than a partnership. (16 marks)
TYPES OF BUSINESS ORGANIZATIONS
MAY 2012

Linda, a small sole trader, is thinking of expanding her business. She is faced with two
options: To go into a partnership or to convert to a limited liability company.

a) (i) Define the term ‘partnership’. (2 marks)

(ii) Outline THREE advantages that Linda would enjoy if she decides to continue
operating her business as a sole trader rather than going into a partnership. (6 marks)

(b)Discuss TWO advantages and TWO advantages that Linda may experience if she decides
to convert her business to a limited liability company rather than a partnership. (17 marks)