1. 4.1 – Types of Business Organisations
IGCSE Economics
4.1 – Types of Business Organisations

2. Learning Outcomes
Describe the type of business organisation in the public and private sectors:
Sole Proprietors
Partnerships
Private Limited Companies
Public Limited Companies
Cooperatives
Public Corporations
Multinationals
Describe and evaluate the effects of changes in the structure of business organisations

3. Types of Organisations
Ownership Types
Private Sector
Public Sector
Profit
Non-Profit
Cooperatives
Unincorporated
Sole Trader
Partnership
Incorporated
Private Limited Company
Public Limited Company
Public Corporations
Public Services
Local Authorities
Charities
Trade Unions
NGOs
Social Organisations
Advocacy Orgs

4. Liability – A business owner’s responsibility
Owning a business involves financial risk
Unlimited liability
The financial obligation of business owners in the event of business failure is to repay all business debts (even if it means selling off their personal possessions)
Limited liability
The financial obligation of business owners for business debts is no more than the amount of capital they invested in the enterprise
This is because business owners with limited liability have a separate legal identity from their business

5. Task – In Groups
Each group is going to prepare a presentation about a particular type of business organisation.
Sole Proprietors
Partnerships
Private Limited Companies
Public Limited Companies
Cooperatives
You will add your presentations to the google drive folder so that everyone can share your resources

6. Things your presentation must include
A definition
The key features of the business organisation
What makes this type of business unique from other types
Who owns the business?
Do the owners have limited liability or unlimited liability?
Who runs the business?
How the business is set up
The advantages of this type of organisation
The disadvantages of this type of organisation
A quiz at the end to check that everyone has listened!

7. Websites to help you:

8. Sole Trader
A sole trader or sole proprietorship is a business owned and controlled by one person
It is the oldest and most popular form of business organization
Advantages
A sole trader is his or her own boss
A sole trader can choose his or her own hours of work
A sole trader receives all profits
This type of business is easy to set up
Disadvantages
A sole trader:
may lose revenue if off sick or on holiday
has unlimited liability to pay business debts
has full responsibility for the business
may lack capital to finance business growth

9. Partnership
A partnership is a legal agreement between two or more people to own, finance and run a business
It is popular among professionals such as solicitors, accountants, veterinary surgeons
Advantages
A partnership is easy to set up
More partners means more capital
Partners bring new skills and ideas
Limited partners have limited liability
Partners share responsibility for decisions
Disadvantages
Partners can disagree
Partners share any profits
General partners have unlimited liability
Partners may lack capital to finance growth

10. Limited Company
These companies sell shares in their ownership to raise permanent (i.e. non-repayable) capital
Shareholders are the owners of joint-stock companies
Shareholders elect directors to run their company from day to day
These firms are also known as corporations or limited companies because shareholders have limited liability
A joint-stock company has a separate legal identity from its owners (it is taxed separately; it can own assets and borrow money in its own right; it can be held legally responsible for any damage or injury to third parties)

11. Private Limited Company
Advantages
Shareholders have limited liability
Shareholders receive dividends from profits
Shareholders elect directors to manage company
The company has a separate legal identity
It is a popular form of organization for sole traders and partnerships seeking to raise additional finance for business expansion
Disadvantages
Financial information may have to be disclosed
Large shareholders can out-vote others
Directors may run the business in their own interests rather than for shareholders
Shares can only be sold privately and with the agreement of all other shareholders

12. Public Limited Company
Advantages
Shareholders have limited liability
Shareholders receive dividends from profits
Shareholders elect directors to manage the company
Companies have a separate legal identity
Shares can be advertised and sold publicly on the stock market to raise significant new capital
Disadvantages
The legal costs of set up can be high
Annual financial accounts must be published
Directors may run the business in their own interests rather than for shareholders
The original owners may also lose control of their company if it is taken over by another company through the purchase of shares on the stock market

13. Cooperative A cooperative is owned by its members for mutual benefit
There is a one member, one vote policy

14. Multinationals -

15. What is a Multinational Company?
A multinational company has production or service facilities in more than one country
They generally have a home country and operate in one or more host countries
Multinationals are some of the largest companies in the world, selling many billions of dollars worth of goods and services, and employing many thousands of people globally
Total revenue $458.4 billion
Total employees 102,000
Total revenue $405.6 billion
Total employees 2,100,000

16. Some Multinational Companies
What type of business organisation are Multinationals likely to be? Why?

17. Quiz – What is the HoME country?

18. Which is the home country?
Finland
1. Nokia

19. Which is the home country?
France
2. Carrefour

20. Which is the home country?
Germany
3. Siemens

21. Which is the home country?
United Kingdom
4. Vodafone

22. Which is the home country?
United States
5. Boeing

23. Which is the home country?
Japan
6. Nissan

24. Which is the home country?
USA
7. Kelloggs

25. Which is the home country?
Italy
8. Fiat

26. Which is the home country?
Denmark
9. Carlsberg

27. Which is the home country?
Sweden
10. Volvo

28. Task What are the biggest Multinationals in the world?
I have a list of the top 10 companies by Revenue, Profits and overall blended ranking according to Forbes.
Guess which companies are included. You can pick 15 companies

29. 10 biggest multinationals – (Revenue)

30. 10 biggest multinationals – (Profits)

31. 10 biggest multinationals – (Forbes blended ranking)

32. Multinational Facts…. What factors have caused this?
51 of the 100 largest economies in the world are corporations.
The Top 500 multinational corporations account for nearly 70 percent of the worldwide trade; this percentage has steadily increased over the past twenty years
The number of multinationals has risen from 7,000 in 1970 to 78,000 in 2005
What factors have caused this?

33. Why are multinationals on the increase?
Economies of Scale
Government incentives
Reduction of trade barriers
Increasing globalisation leading to demand
Cheaper transportation costs
Differential in Labour costs and tax rates

34. Benefits of Multinational Companies
Countries generally wish to encourage foreign companies to invest in facilities in their country
Can you think of any reasons why this might be the case?

35. Advantages Provides local people with jobs
Up skilling of local workers
Increase in tax revenue
Increase in exports
Improvements to infrastructure/technology
The multiplier effect
However….. What disadvantages could multinationals bring to host countries?

36. Potential disadvantages of MNCs
Environmental pollution
Depletion of natural resources
Exploitation of less developed countries
Repatriation of profits
Inequality of income
Too much power?

37. Multinationals Implications for host economies and governments
It has a huge global customer base and revenue potential
It can minimize transport costs locating plants across different countries to be near raw materials or large consumer markets
It can minimize wage costs by locating operations in low-wage economies
It has low average production costs from large-scale production
It can raise significant capital for business expansion, R&D and to employ highly skilled labour
Implications for host economies and governments
Potential economic benefits
Potential economic costs
A multinational provides jobs and incomes
It brings business knowledge, skills and technologies which can help other firms
It pays taxes on its profits which help boost government revenues
It increases export earnings from trade
A multinational can transfer their profits to other countries to avoid paying tax
It may force local competition out of business
It may exploit workers in low-wage economies
It may use its power to secure generous subsidies and tax breaks from a government

38. Public Corporations

39. Public Corporations
This is a business-like public sector organization created to carry out a particular public sector function or to operate under governmental control, such as a municipal water company, a public health service or a central bank
Some may be run for profit
They are responsible for day-to-day running of nationalized industries

40. Public Corporations – how they are organised
Ownership and control
A public corporation is run by a board of directors
They are accountable to government ministers
Committees monitor and investigate any irregularities and complaints
Legal status
A public corporation has a separate legal identity from its directors and government
Finance
Its finance comes from taxes, charges and other public revenues
It is also financed by any re-invested profits
Profits may be used by government to fund other public services and spending

41. Still public?

42. Public Corporations… Why do they exist?
How are their objectives likely to be different from those in the private sector?
What are the disadvantages of public corporations?
What are the benefits of privatisation?

43. Public Corporations – In Summary