BUSINESS ORGANISATION AN INTRODUCTION TO BUSINESS ORGANISATION

TO UNDERSTAND THE ORGANISATION OF BUSINESS WE WILL TAKE A LOOK AT: PRIVATE SECTOR Sole Traders Partnerships Private Limited Companies (“Ltd”) Charities Public Limited Companies (“Plc”) PUBLIC SECTOR Public Corporations Local Authorities The PUBLIC and PRIVATE Sectors - their differences - their advantages BUSINESS ORGANISATION

Business Organisation has two main categories The PRIVATE Sector The PUBLIC Sector “ORGANISATIONS” “COMPANIES” BUSINESS ORGANISATION

The PRIVATE Sector These companies are owned by private individuals aim to make a profit PRIVATE SECTOR

The PUBLIC Sector These organisations are owned by the State (the taxpayer) and managed by Government provide essential services to the general public regardless of income PUBLIC SECTOR

LET’S TAKE A LOOK AT …. PRIVATE SECTOR Sole Traders Partnerships Private Limited Companies (“Ltd”) Charities Public Limited Companies (“Plc”) PRIVATE SECTOR

SOLE TRADERS Bob is good at building things and decided to set up a business of his own. As a sole trader he is the one owner. Bob often gets more work than he can handle, so sometimes he employs other people to help him. He also needs someone to man the phone and do the paperwork. Sole Traders are usually local. Services include newsagents, hairdressers, fashion boutiques, bakers, auto repairs, decorators, café/restaurant etc. In times of recession some people are made redundant and use their compensation to set up a new business as a sole trader. BOB THE BUILDER PRIVATE SECTOR

SOLE TRADERS After Bob has bought tools and materials, paid salaries, bills, tax and VAT he can keep any profits. He might use the money to re-invest in the company which will allow his business to grow. He might have earned enough money to buy himself a new car or go on a luxury holiday! However, having UNLIMITED LIABILITY, Bob will be responsible for any debts to the point of having to sell his home. Bob likes working for himself and making his own decisions – and he doesn’t have to answer to anyone! BOB THE BUILDER PRIVATE SECTOR

PARTNERSHIPS Meet Kevin and Richard, the two dentists who are partners at my local practice! They will have made a “Deed of Partnership”, a legal agreement in case of dispute. They both own the practice and have invested similar amounts of money. This helps them to share the costs of expensive equipment, materials, staffing to run the surgery and insurance, etc. They also share the decision-making and could invite more partners to join them, but not too many. Their commitment is also UNLIMITED LIABILITY. Examples of other professional partnerships will be doctors, accountants, solicitors, etc., but any business can be started as a partnership. PRIVATE SECTOR

PRIVATE - VOLUNTARY SECTOR CHARITIES Charities raise money to help people and animals in need as well as for medical research. Charitable organisations in the Private Sector are also known as being in the VOLUNTARY sector. They employ an army of volunteers who spend time to help others and receive no wages. However, management specialists are appointed to promote the different organisations and are paid competitive salaries. Anyone can set up a charity for a specific purpose – such as raising money for a special operation. However, those charities raising an annual income of £1,000+ must be registered. When “Charitable Status” is awarded, any SURPLUS must be used for social benefits. PRIVATE - VOLUNTARY SECTOR

PRIVATE LIMITED COMPANIES These are identified by the abbreviation “Ltd” following the company name. Successful sole traders and partnerships are able to form new companies with LIMITED LIABILITY. This means that - should the company fail - their financial liability is limited to the amount of their investment and personal assets are safe. When forming a Limited Company, owners exchange their rights to company profits in return for a regular salary and become paid employees, though maintaining Owner/Director status. Depending on their investment, they will each own a share of the company, maybe 50:50% or 60:40%. The company can be sold on as a going concern if either or both of the former owners wish to retire, for instance, unlike unlimited establishments which would have to be wound up.. BOB’S BUNGALOWS LTD COSTNER & GERE LLP PRIVATE SECTOR

THE STOCK EXCHANGE “MY WORD IS MY BOND” Before talking about PUBLIC LIMITED COMPANIES you need to know that STOCKS AND SHARES are traded on The Stock Exchange. History The London Stock Exchange is one of the world’s oldest stock exchanges and can trace its history back more than 300 years. Starting life in the coffee houses of 17th century London, it quickly grew to become the City’s most important financial institution. PRIVATE SECTOR

PUBLIC LIMITED COMPANIES These are the largest privately owned businesses. Before being “floated” on the STOCK EXCHANGE the company is valued and a price calculated for each SHARE. After being launched, the price can go up or down depending on its market strength. A minimum £50,000 might be enough for one of these! Millionaires have been made overnight! Value Increase = Profit; Value Decrease = Loss. Shares are then traded and are bought by the general public (as investments) and organisational investors (eg for pension funds) who then become SHAREHOLDERS. They will all be hoping the company does well and makes a profit! Directors are appointed to manage the company in exchange for a salary and may also choose to own shares. Shareholders are not involved in the running of the company but expect to see sound management decisions boosting profits. The shareholders receive a share of the profits. TESCO PLC M&S GROUP PLC LLOYDS BANKING GROUP PLC PRIVATE SECTOR

LET’S TAKE A LOOK AT …. PUBLIC SECTOR Public Corporations Local Authorities PUBLIC SECTOR

PUBLIC CORPORATIONS These few businesses, which provide essential national services, are owned by the State “in the public interest”. If in financial difficulty the State must help them to survive by using mainly taxpayers’ money. The Government oversees the Corporation by appointing a Secretary of State. This MP is responsible for the company’s overall policy and for reporting its activities to Parliament. The MP will be keen to see the company making a profit rather than having to tell taxpayers how badly the company is performing! BRITISH NUCLEAR FUELS BANK OF ENGLAND PUBLIC SECTOR

PUBLIC CORPORATIONS PRIVATISATION These companies used to be Public Corporations. They were PRIVATISED - returned to the Public Limited Company sector - to become more competitive, make better profits and remove the burden of expense from Government. BRITISH TELECOM TOWER PUBLIC SECTOR

LOCAL AUTHORITIES If you were employed at the Town Hall you would be working in the PUBLIC SECTOR. Local Authorities must provide services for local communities. To do this they obtain money from a variety of different sources, such as: The Government, which each year pays each Council a REVENUE SUPPORT GRANT. Householders who pay COUNCIL TAX based on the size and value of their homes. Companies which pay RATES ON BUSINESS PREMISES. Tenants who pay COUNCIL HOUSE RENTS CHARGES FOR SERVICES eg local leisure centre facilities. LOANS – when extra money is needed for special local projects. PUBLIC SECTOR

LOCAL AUTHORITIES ENVIRONMENTAL HEALTH LIBRARIES ROAD MAINTENANCE POLICE FIRE SERVICE REFUSE COLLECTION LOCAL AUTHORITIES ECONOMIC DEVELOPMENT SCHOOLS MAGISTRATES’ COURTS RECREATION & TOURISM SOCIAL SERVICES PUBLIC SECTOR

BUSINESS ORGANISATIONS SUMMARY We’ve looked at the growth of the Sole Trader through to Public Limited Companies and Charities in the PRIVATE SECTOR. In the PUBLIC SECTOR we’ve looked at the organisations and the Local Authorities which the Government must support. Now try an exercise and do some research! BUSINESS ORGANISATIONS

BUSINESS ORGANISATIONS WANT TO KNOW MORE? Read through the glossary and relate the phrases to their meanings. Complete the blank glossary to see how much you can remember. Using the PowerPoint handouts write down any advantages you can find. Add more if you can. Undertake further research on Business Organisations: Administration by Carol Carysforth Unit 3 pp169-191 Internet research BUSINESS ORGANISATIONS