Business Organisation Characteristics

Study Notes

A business run and managed by one person with the aim of making a profit
Has one owner who takes all profits and makes all decisions
Source of capital: personal contribution, own savings, and borrowing from family/bank
Advantages: easy to form, owner takes all profits, and makes all decisions
Disadvantages: unlimited liability, limited capital, not a legal entity, and owner bears all losses
Examples: village stores, canteens

A business run and managed by at least two people with the aim of making a profit
Minimum of 2 and maximum of 25 owners
Source of capital: contribution from partners
Advantages: more capital than sole trader, more skills, and shared workload
Disadvantages: unlimited liability, less capital than companies, and more disputes/conflict of interest
What governs entity: partnership deed/partnership agreement
How profit/loss shared: according to partnership deed/agreement

A business owned and run by family members with the aim of making a profit
2-25 shareholders
Source of capital: contribution from members of the same family
Advantages: limited liability, more capital than partnership, and not required to publish audited annual reports
Disadvantages: less capital than public companies, shares can only be issued to family members
What governs entity: memorandum and articles of association
How profit/loss shared: according to company policy on distribution of dividends

A business owned by shareholders and controlled by a board of directors with the aim of making a profit
Minimum of 7 members, no maximum limit
Source of capital: money received from shares issued to the public
Advantages: limited liability, more capital than private companies, and more expertise
Disadvantages: expensive to form, and loss of control
What governs entity: memorandum and articles of association
How profit/loss shared: according to company policy on distribution of dividends
Examples: RB Patel

An organization set up by the government with the aim of providing goods/services to the general public
Number of owners set by the government
Source of capital: majority contribution by the government
Advantages: provides goods which are expensive for private firms to produce, and is controlled by the government
Disadvantages: expensive to form, and since only the government provides the goods, there is no competition
What governs entity: act of parliament
How profit/loss shared: profits given to the government
Examples: FEA

A group of people who join together with similar interests with the aim of providing service to its members
Minimum of 10 members
Source of capital: contribution from members/donation
Advantages: members share profit and learn more skills
Disadvantages: conflict of interest among members
What governs entity: committee
How profit/loss shared: given to members in form of bonuses
Examples: Lovia Cooperative Limited

Associations formed by a group of people with common interest with the aim of providing service to the community
Number of owners: group of people
Source of capital: subscription/fundraising activities
Advantages: provides goods and services to the people without making profits
Disadvantages: conflicts arise among members
What governs entity: office bearers
How profit/loss shared: distributed to members
Examples: Rotary Club, Lions Club, Scouts, St.John Ambulance, Red Cross