805- Introduction to Management Chapter 2: Types of Organisations page 12

Learning outcomes This chapter will enable you to: Identify different types of organisation; Recognise which types of organisation may be most appropriate in a given situation Describe different ways of structuring organisations.

Profit or Non-Profit? Profit-making organisations work largely to return a profit to shareholders. Profit ensures the (long-term) survival of the business: e.g. sole traders, partnerships and companies. Not-for-profit organisations work to gain societal good, and profit is less important: e.g. incorporates societies, trust.

Legal Form Organisations in New Zealand can take many different forms. These include: Sole trader Partnership Corporation or company Trust Incorporates society

Features of a sole trader One person owns the business. They pay all costs They receive all profits The have unlimited liability They can dissolve the business at any time. See page 14 and page 15 Case Study: A cut above the rest

Features of a partnership Two or more people own the business. May contribute different skills or amounts of capital Share the profits and losses (according to a pre-determined agreement. Unlimited liability Often professionals like doctors and lawyers are in partnerships because of legislative restrictions. See page 15

Features of a company A ‘separate legal entity’, distinct from the people who hold shares in it or who are employed by it. Must be registered under the Companies Act 1993. Limited liability Has a Board of Directors and appointed managers. See page 16

Features of a trust Trustees manage the funds/business on behalf of trustees or beneficiaries. Trustees are personally responsible for decisions made. Family trusts are a common means of protecting assets and funds for future use by children in the advent of relationship or business failure. See page 18

Features of a co-operatives Comprised of groups of people of like-mined individuals who share their resources for the purposes of achieving a common business goal Controlled by their members who have voting rights Profits are shared proportional to the level of contribution. E.g. Fonterra suppliers get paid per kilogram of milk fat solid they supply to the co-operative. See page 18

Features of a franchise A unique form of business. The franchisor ‘owns’ the name of the business, and the systems and processes. The franchisee finances and manages the day-to-day running of the business, with the support of the franchisor. A franchise agreement determines the details of the relationship. See page 19 and Case study: Mowing makes money

Chapter summary All organisations have a form, and this form will vary depending on the needs of the owners. The public sector is run by the central or local government, while the private sector is run by individuals or organisations not related to the government. There are four common forms of organisation in NZ, sole trader, partnership, company, or trust. Each has different legal requirements.

Chapter summary questions What is the difference between a sole trader and a partnership? Identify two profit-making organisations and two non-profit making organisations Outline the main characteristics of a franchise What does it mean if an organisation has limited liability? How does a trust differ from an incorporated company?