Abdulla Afeef Diploma in Human Resource Management

Business organization

MI Collage

An organization or economic system where goods and services are exchanged for one another or for money.

Business Organization

Types of business

• Public sector business is owned and run by the government

• Private sector business are owned and run by private individual

• Sole Trader• Partnership• Corporation• Co-operative society

Sole Trader • Sole Trader is a business owned by

only one person.

Advantages

• few legal formalities.• owner is his own boss, and has total

control over the business.• owner gets 100% of profits.• owner has freedom to change working hours• Personally contact with customers.• Does not have to share information with

anyone

Disadvantages of a Sole Trader

• Nobody to discuss about the business. • Unlimited liability.• Limited finance.• The owner normally spends long hours working.• lack of specialists.• not benefit from economies of scale.

Partnership• partnership is a business owned by 2 - 20 persons

who contribute resources into the entity

Advantages of a Partnership

• More capital than a sole trader.• Responsibilities are split.• Any losses are shared between

partners.• Ease of establishment

Disadvantages of Partnership

• Unlimited liability.• Partners can disagree on decisions• slowing down decision making.• one partner is inefficient or dishonest, everybody

loses.• Limited capital• limit of 20 people for any partnership.

Corporation

• Corporation is a business organization that has a separate legal personality from its owners.

• Ownership in a stock corporation is represented by shares of stock.

Advantages of a Corporation• Shareholders have limited liability.• Ownership is transferable

Corporations can raise additional funds through the sale of stock.

• Corporation has separate legal entity

Disadvantages of a Corporation

• process of incorporation requires more time and money than other forms of organization.

• monitored by state and some local agencies, and as a result may have more paperwork to comply with regulations.

• higher overall taxes.  • conflict between shareholders and directors.

Co-operative Society

•co-operative organisation is defined as a form of organisation where in person voluntarily associate together as human being on the basis of equality for economic interests for themselves.

Advantages of a Co-operative Society

• easily formed. • liability of each member is limited. • overhead costs are comparatively low. • co-operative society has a long life. • membership of a co-operative society is open to

all members of the public. • to help the poor and middle-income people.

Disadvantages

• limited capital only from the members.• not possible to maintain secrecy. • lack of motivation in a co-operative society.• The shares of co-operative society are not freely

transferable • Political Interference is very high. • The members are often not loyal to their

cooperatives.

Comparison Table

characteristics

Sole Trader

Partnership

Corporation

Co-operative Society

Formation Easy to form Need to fill documentation

Need to fill documentation

Easy to form

Ownership Owner(single) Partner(2-20) Shareholders (2-50)

Members (At least 10)

 

Operate

 

 

By the owner By the board of directors

appointed from the partners

By the board of directors

appointed from the shareholders

By the board of directors elected

from the members

 

Allocation of profit 100% to owner Profit has to share among the partners

Profit has to share among the

shareholders

Non-profit organisation

 

 Liability Unlimited liability

Unlimited liability Members are not liable for the debt of the company

Limited liability

Conclusion

• Each has different level of liability, risk and benefits.

• There are different people who start business for different purposes.

• sole trade is the most popular way of starting a new business, especially common amongst those going in to business on their own for the first time.

• Establishing a sole trade is cheap and relatively uncomplicated.