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Business Organisations

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13 views3 pages

Business Organisations

Uploaded by

Jerome Nisa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Economics

Business Organisations in the Free Market Economy

Sole Proprietorship – a business owned and controlled by a single person.

Features of Sole Proprietorship


 Usually small businesses.
 Easy to establish as very little capital is needed to start one up.
 Easy to operate as the business might be involved in just one or two activities.
 They are often started up in the home.

Advantages of Sole Proprietorship


 Easier to establish and manage.
 Decision making is quick.
 Owner receives all profits.
 There are no business taxes.

Disadvantages of Sole Proprietorship


 There are long working hours and it is difficult for the owner to take a vacation.
 There is lack of continuity.
 There is sometimes a lack of competition.
 There is unlimited liability.

Partnerships – a business organisation owned by two or more persons.

Features of Partnerships
 Partners provide the financial capital needed.
 Partners share profits and losses.
 Partners bare the liabilities for debts incurred.
 Partners need to register the business with the Registrar of Companies.

Advantages of Partnerships
 Easier to form and manage.
 The partnership increases the ability of the partners to obtain financing for the business.
 Large scale operation can be undertaken.
 Partners have unlimited liability.

Disadvantages of Partnerships
 Each partner has to take responsibility for the actions of the other partners.
 Operating costs are higher than in a sole proprietorship.
 Decision making is slower and more difficult compared to a sole proprietorship.
 The partnership has a limited life.

Private joint stock companies (private limited companies) – a business with up to 50 owners,
who own shares in the company.

Features of Private Limited Company


 The business is a distinct entity in the eyes of the law, separate from its owners. This
means that it is an individual with its own identity. A customer or a creditor can file a suit
against the company but not the owners.
 The owners (those who finance the business) are called shareholders. The shareholders
are private individuals in the economy and could be family members. Shareholders have
limited liability.
 The company must be registered with the Registrar of Companies in the country in which
it is operating. The name of the business must include the word ‘Limited’ (Ltd).
 By law, this business must have a minimum of two members and a maximum 50.

Public joint stock companies (public limited companies) - comprises a group of persons coming
together to conduct some form of business activity. This form of business is also a legal entity.
The business is separate from shareholders.

Features of Public Limited Companies


 Funding for this business comes through borrowing from banks and other financial
institutions, or through the sale of stocks and shares on the stock exchange to members of
the public.
 Members of the public purchase stocks and shares from their savings.
 Shareholders have limited liability.
 A minimum of seven persons can begin business operations. There is no limit to the
maximum number of investors.

Cooperative - This is an enterprise that is jointly owned and controlled by a group of persons
who have set up the enterprise to meet their economic needs; for example, to sell the product of
its members. An example of a cooperative is the Jamaica Agricultural Society’s Coffee Growers
Cooperative Federation.

Principles of Cooperatives
 Membership is voluntary. It might, however, be based on a particular occupation; for
example, coffee growers will be part of a coffee growers’ cooperative. Taxi and minibus
drivers could form part of a transport cooperative.
 Cooperatives are democratic. They are controlled by their members and each member has
one vote.
 There is a limit on the percentage of shares that any one member can hold.
 The surplus for a financial period, after all expenses are taken care of, is used for
developing the cooperative – placing some as reserves, benefiting members according to
their participation, and supporting any other activities approved by the members.
 Cooperatives are committed to supporting and cooperating with other cooperatives.
 Cooperatives are committed to the education and training of their members.
 Cooperatives work for the development of their communities.

Multinational Corporations - This is a firm that owns and operates production units or sales
outlets in a number of foreign countries, for example, Nestlé Ltd.

Features of Multinational Corporations


 MNCs invest heavily in the primary and secondary sector in the host countries.
 They have branches or subsidiaries in many foreign countries. Globalisation has allowed
these companies to extend their geographical reach.
 The subsidiary might not be totally owned by the parent company. However, the parent
company has the controlling share in subsidiaries.

Assessment #3 (20 marks) Due November 4


a) Compare the private and the public joint companies.
b) Contrast the private and the public joint stock companies.
c) Explain two benefits and two costs to the host country of a multinational company
locating there.

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