types of organisation

• sole trader


  in the private sector, small businesses ran by 1 person who must rely on own finance
• advantages of being a sole trader

  easy to set up, all profits retained for them, all decisions made by them
• disadvantages of being a sole trader

  difficult to raise finance, unlimited liability, heavy workload
• liability


  state of being held legally responsible for an action
• partnerships


  in the private sector, min of 2 and max of 20 partners, set up by deed of partnership document
• deed of partnership document


  states how much money each partner invested into the partnership and role of each partner
• advantages of partnerships

  more equity available to finance the business compared to a sole trader, different partners can bring different skills, shared workload
• disadvantages of partnerships

  unlimited liability, profit shared between partners, partners may disagree on decisions
• limited companies (Ltd)


  in the private sector, more than 20 partners
• advantages of limited companies (Ltd)

  owner retains control, limited liability, easier to raise finance
• disadvantages of limited companies (Ltd)

  must be registered with the registrar of companies, high legal and administrative set-up costs, harder to motivate and control workers as profits are only shared between shareholders
• dividend


  distribution of post-tax profit to shareholders of a company
• public limited companies (Plc)


  in the private sector, must have 2 shareholders + 2 directors + 1 qualified company secretary
• advantages of public limited companies (Plc)

  easier to grow and diversify due to increased capital, more finance raised as shares are available to the public through the stock market
• disadvantages of public limited companies (Plc)

  directors may disagree over how to run the company, threat of takeover, difficult to pursue objectives other than increasing profit, must have a share capital of at least £50,000
• multinational organisations


  in the private sector, headquarters and production facilities in different countries
• why do companies become multinational organisations?

  to increase market share as they may be at saturation point in the domestic market and require a new outlet, secure cheaper premises and labour as cost of land will be cheaper in developing countries, to avoid tax or trade barriers as different nations have different levels of corporation tax and different barriers to entry, government grants attract companies as the government gives finance for them to open up operations in their country
• advantages of multinational organisations?

  creates jobs boosting local economy + employment rate which increases tax contribution, brings expertise in and improves skills of the workforce which might improve technology in the developing world if IT is used, benefits from economies of scale so the cost per unit is lowered through specialisation, technical economies gained with automated equipment but only works if fixed costs of machine is spread over outputs
• specialisation


  dividing a large workforce up so each small job is done expertly
• disadvantages of multinational organisations

  relies on deskilled jobs which are low-paid + repetitive, profits are not kept in the host country, corners cut so social responsibility may be overlooked, exploits the workforce + government so workers work below minimum wage for longer hours, exerting political muscle as they may threaten to pull out of the country if they don't get to pay cheaper wages + overhead + clean up deals
• franchises


  in the private sector, franchisee can buy into an existing business and acquire the right to use their business idea from the franchisor
• advantages of franchises

  low risk growth as the franchisee invests the majority of the capital, receives a percentage of all franchisee profits annually
• disadvantages of franchises

  little autonomy over decisions as franchiser decides on products + store layout + uniforms + etc., royalties must be paid annually, high initial fees
• finance for public sector

  raised through a variety of taxes
• charity


  in the third sector, organisation set up for a specific cause, finance raised through grants + fundraising organisations + donations
• community groups


  in the third sector, non-profit, profits reinvested into the organisation
• social enterprises


  in the third sector, runs organisation like a business but aim to help the community, profits reinvested into the organisation