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    Business Organisations

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    Jerome Nisa

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    Business Organisations

    Uploaded by

    Jerome Nisa
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    2 views3 pages

    Business Organisations

    Uploaded by

    Jerome Nisa

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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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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