Business: Types of Organisations

Business: Types of Organisations

Sole Trader

  • A sole trader is the simplest form of business organisation.
  • This is a business owned and operated by one person.
  • They are personally liable for all the business’s debts (unlimited liability).
  • They tend to have a small customer base and localised business operations.

Partnership

  • A partnership involves two or more people conducting a business together with the intention of making a profit.
  • All partners are responsible for the management of the business.
  • Liability for the partnership’s debts can be shared between partners (this depends on the terms of the partnership agreement).

Private Limited Company (Ltd)

  • A private limited company (Ltd) is a type of business model that offers limited liability to its shareholders.
  • Shares in a private limited company cannot be publicly traded.
  • This makes it a popular organisational structure for family-run businesses.

Public Limited Company (Plc)

  • A public limited company (Plc) is a company whose shares can be purchased by the public.
  • Shares can be bought and sold on the stock exchange.
  • Plcs have to meet certain regulatory requirements and make their accounts public.

Cooperative

  • A cooperative is a business owned and run by its members, who may be its customers, employees, or residents.
  • Profits are distributed among its members who all have a say in how the business is run.
  • Co-operatives operate on the principle of ‘one member, one vote’.

Franchise

  • A franchise operates under the brand and business model of a larger parent company (the franchisor).
  • The franchisee pays a fee to the franchisor, and usually a percentage of ongoing profits.
  • Provides the safety of a proven business model and brand recognition.

Public Sector

  • These are organisations controlled by the government.
  • They provide essential services like healthcare, education, and infrastructure.
  • Financed through taxes rather than profits.

Charities/Not-for-profit Organisations

  • Charities and not-for-profit organisations operate to fulfill a social or environmental mission.
  • Any surplus income is reinvested in the organisation to further its goals rather than being distributed to shareholders.
  • Funding comes from donations, grants, and philanthropy.

Remember that each of these types of organisations has its advantages and disadvantages, and the suitable structure can depend on the operational, financial and strategic needs of the business.