Different Types of Businesses

Topics: Stock market, Corporation, Stock Pages: 8 (1616 words) Published: April 7, 2013

Types of organisation:

Private sector
* Owned and controlled by individuals.
* Have corporate and non-corporate businesses.
1) non-corporate: sole trader
2) Corporate: PLC
Pvt. Ltd.
- Sole Trader:
Advantages: easy to form, 2) owners have total control, 3) able to establish close personal relationship with consumers. - Disadvantage: 1) unlimited liability, 2) small profits, 3) small capital.

* Agreements between two or more people to set up and carry on a business. The deed of partnership establishes the voting rights of the people in the business, the amount of finance contributed by each partner, the roles, how profits are shared.

Advantages: 1) risks are shared, better ideas, fewer legal formalities, shared decision making, and more capital put into the company.

Disadvantage: 1) unlimited liabily, discontinuity, delay in decision making, conflicts between partners.

Characteristics of Ltd. Companies.
- limited liability
* Separate legal entity
* Capiltal is divided into shares
* Run by directors.

How limited companies are formed.
* M.O.A and the A.O.A needed

- name of the company
* Name and address
* The liabilities of the company


* The rights of the shareholder
* The procedure for appointing directors
* Frequency of company meeting
* The arrangement for auditing company

Pvt Ltd.

* Tend to be small
* Shares can be transferred privately
* Family businesses seeking for limited liability
* Directors tend to be shareholders.


* Limited liability
* More capital can be raised
* Outsiders cant control the company
* There is longevity


* Profits have the be shared
* Long legal procedure
* Firms are not allowed to sell shares on the stock market.


* Cannot begin trading until it has completed tasks and has received at least 25% payment for the value of shares * It will then receive a Trading certificate
* Shares will be listed on the stock exchange.
* Is expensive

* Huge amounts of money can be raised from the public
* Production costs will be lower
* Because of their size, PLC tend to dominate the market. * Easier to raise finance

* Is expensive
* It is possible for outsiders to take over the company
* There is no privacy of accounts and all have to be shown to the public * They cannot deal with customers at a personal level
* Oligopoly- concentration of power is held by only a certain group of people

Public Sector
* Involves businesses that are owned by the government.
* The majority of the capital required to operate public sector businesses comes from tax revenue.

* This is the process that transfers ownership of public sector bodies to private sector. * Includes selling businesses and deregulating certain sectors such as the bus industry to allow companies to bid for them. * The theory was that this would increase efficiency and at the same time provide a usefull source of finance. Advantage

* Makes the business more efficient
* Saves the govt. expenditure in the form of subsidies.
* It might cut costs
* Offers members of the public to be shareholders.

* The objective to become more efficient the number of employees decrease. Thus resulting in an increase in unemployment. * Revenue opportunities are lost.

Size of business
Different measures of size
1) Revenue- the value of products sold.
- it is usually used to compare two large businesses which compete with each other in the same market. - revenue can be related to the concept of market growth.
- eventho growth isn’t used normally, it is frequently used to see how large a...
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