1. TYPES OF BUSINESS ORGANISATION BY P. MURALIDHAR
CHAP 19….
TYPES OF BUSINESS ORGANISATION BY
P. MURALIDHAR

2. CHAPTER TOPICS WHAT ARE THE DIFFERENT TYPES OF BUSINESS ORGANISATIONS?
WHAT ARE SOLE TRADERS?
WHAT ARE PARTNERSHIPS?
WHAT IS A LIMITED COMPANY?
WHAT IS A CO-OPERATIVE?
WHAT ARE STATE OWNED ENTERPRISES?
WHAT ARE THE CHANGING TRENDS IN BUSINESS OWNERSHIP AND STRUCTURE?
WHY HAVE AGRICULTURAL CO-OPS TURNED INTO PLC’S?
WHY DO BUSINESSES CHANGE THEIR LEGAL STRUCTURE OVER TIME?

3. 1. WHAT ARE THE DIFFERENT TYPES OF BUSINESS ORGANISATIONS?
SOLE TRADER
PARTNERSHIP
PRIVATE LIMITED COMPANY
CO-OPERATIVE
STATE OWNED ENTERPRISES
These business structures are going to be compared under the following headings:
Formation
Dissolution
Ownership
Management & finance
Profits & risk

4. This is a one person business run by the owner with his/her own money.
2. What are Sole Traders?
This is a one person business run by
the owner with his/her own money.
Advantages
Disadvantages
1. Formation & Dissolution
Very easy to form/dissolve. It can be easily changed into partnership, ltd company etc.
If he/she dies then so does the business
2. Management & finance
Sole traders have full control of how business is run. Decision making is quick. Financial records do not have to be revealed to the public.
Long working hours are common and holidays are difficult to arrange due to the commitment needed to be a successful sole trader.
Can be difficult to raise all start up finance and as a result loans are required. They can be expensive on the business start ups
3. Profit & risk
Keeps all profit.
Takes all the risk.
Takes all risk. They have unlimited liability. They may lose assets in the event of a debt needing to be paid.

5. 3. What are partnerships? Advantages Disadvantages
Is an agreement between 2 or more people to go
into business with a view to making a profit? There
can be no less than 2 members and no more than 20.
Advantages
Disadvantages
1.Formation
&
Dissolution
Easy to form. You can start immediately, however if business name is different to that of partners you must register the company name.
If a partner leaves or a partnership ends a new partnership must be agreed.
2. Management & finance
Decision making is shared.
Responsibility is shared.
Financial details not open to be viewed by public
Disagreements can easily occur.
If someone dies the business is discontinued.
3. Profit & risk
Extra capital available to finance the
business
Unlimited liability, each partner is responsible for the debts of the business
Profits must be shared between partners

6. 4. What is a limited company?
Ltd companies are regarded as separate legal
entities from the people who own and run them.
The owners are called shareholders and only
gain/lose on the amount they put into the business.
There are two main types of company:
Private limited company (Ltd) – HEITON BUCKLEY
Public limited companies (PLC’s) – LIVERPOOL FC
The main difference is that shares of PLC’s can be freely bought and sold on the stock exchange

7. The management structure of companies

8. How is a private limited company formed
To form a private limited company you must
Have at least two shareholders and one director.
Prepare a Memorandum of Association. This is a document for public use. It details name of company, company objective, the number of shares of each shareholder. This document is kept in the Companies Office.
Prepare an Articles of Association. This is a document for shareholders. It details the internal rules of the company, types of shares issued, how meetings are run, the procedure for electing/replacing directors.
Register with REGISTRAR of COMPANIES in the COMPANIES OFFICE
The companies office issues a “birth certificate” called a CERTIFICATE of INCORPORATION
If you register as a public limited company you must obtain a TRADING CERTIFICATE
TRADING CAN NOW COMMENCE

9. How companies are run?
AGM- a meeting held once a year involving directors, shareholders of a firm discussing events of the previous 12 months & future plans
Board of Directors BOD – this board is responsible for overseeing the running of a company. These directors are the most senior managers of a limited company. Directors can be removed by a majority voting system.
The company chairperson – is a director and is elected by the board to chair AGM’s & EGM’s. They speak on behalf of the BOD.
The Managing Director MD/Chief Executive Officer CEO
Is in charge of overseeing all aspects of company activities. The CEO is answerable to the BOD

10. Limited Company Features
Dissolution
Advantages
Disadvantages
Formation &
Companies can continue to exist even if a shareholder or director dies
The legal formalities of forming a company are more complex, time consuming & expensive than forming other business structures
2. Ownership
Owned by its shareholders
3. Management & finance
Can raise finance for business start ups or expansion through selling of shares.
A lot of paperwork including financial audits, reports etc
4. Profit & risk
Shareholders have limited liability. If company has a lot of shareholders risk is minimal
Profits must be shared

11. 5. What is a co-operative? Advantages Disadvantages
A co operative is business owned and run by a group of people,
AND each has a financial interest in its success.
They also have a say on how it is managed
Co-ops mainly exist in the agricultural industry.
Advantages
Disadvantages
1.Formation
Must have a minimum of 7 members. They register with the REGISTRAR OF FRIENDLY SOCIETIES.
Can be quite difficult to form, time consuming and expensive.
2. Ownership
Co-ops mainly exist in the agricultural industry. Equal voting system exists regardless of the shares held.
They file an annual financial return (report)
Conflict may exist between members in the need for business expansion.

12. What is a co-operative? 3. Management & finance
Management of co-ops are inspired by a spirit of democracy and mutual co-operation.
In some situations finance can be difficult to raise. This can hinder growth.
4. Profit & risk
Members have limited liability.
Large membership of co-ops make sure that there is high demand for goods
Profits must be shared amongst members.
There may be reluctance to share profits with new members.
Risk is quite minimal.

13. 6. What are state owned enterprises?
.These are enterprises that are set up,
financed and controlled by the government.
Advantages
Disadvantages
1. Formation
The government provides the share capital and subsidies. These companies usually have a good understanding with financial institutions, (banks)
Lack of funding which in turn leads to borrowing more from government, this is especially true if the business is not making a profit (i.e IARNROD EIREANN)

14. What are state owned enterprises?
Management and finance
They provide employment
They promote industrial development, (e.g) IDA, Forbairt, Bord Trachtala, Bord Failte
They provide services of necessity including, ESB, VHI, CIE, Bus Eireann, Dublin Bus.
The directors of some firms lack appropriate knowledge in the companies particular area (i.e agriculture), this is because they are appointed through political contacts
The lack of profit making, (i.e. Iarnrod Eireann) sometimes leads to lack of motivation in workplace
Ownership
State owned
Examples
ESB, Coillte, An Post, Bus Eireann
Aer Lingus

15. Forms of Ownership – A summary
Sole Trader
Partnership
Limited Company
Co-op
Formation
Easy
No paperwork
Paperwork
Registration fee
Ownership
Owned by sole trader
Owned by partners
Owned by shareholders
Owned by members
Management & finance
Speedy decision making
Accounts are private
Can be difficult to raise finance
Shared decision making
Disagreements possible
Raise finance through new partners
Managed by BOD
BOD elected by shareholders
Accounts submitted to Companies Office
Raise finance through grants, loans & issuing of shares
Managed by Board elected by members. One member, one vote rule.
Accounts submitted to Register of Friendly Societies
Profits & risk
Keeps all the profit
Unlimited liability
Profit shared
Profits shared among shareholders
Limited liability
Profits shares
Members have limited liability
EXAMPLES
SHOPKEEPERS
TRADESPEOPLE like carpenters, plumbers
SOLICITORS, DOCTORS,
DENTISTS.
Manchester United
Liverpool FC
AIB
Castlebar Credit Union
NCF- Connaught Gold

16. 7. WHAT ARE THE CHANGING TRENDS IN BUSINESS OWNERSHIP AND STRUCTURE?
Rise in the number of firms entering into alliances
Emergence of Irish TNC’s
Rise in the number of SME’s
Privatisation of state owned companies
Agricultural co-ops turning into PLC’s
a) Rise in the number of firms entering into alliances
Many Irish firms are now entering into alliances such as joint ventures. This helps them against larger international firms. They can also share skills, pool resources to further their growth.

17. b) Emergence of Irish TNC’s
The growth of free trade areas and Irelands membership of the EU has led to potential large Irish firms becoming TNC’s. They now have access to a larger market size in which to develop their companies.
Examples: Kerry Group
AIB
FYFFES
These companies are now set up in different global locations such as UK, mainland Europe, USA etc.

18. c) Rise in the number of SME’s
The number of SME’s operating in Ireland is massively growing year after year. The feature of an SME is that has sales of €250,000 or less, it also has employees of 50 or less.
Reasons for the growth of SME’s:
They receive state support in terms of advice, guidance. The govt encourage SME’s S as this will reduce unemployment, increase competition etc.

19. The SME’s are developing in an enterprise culture here in Ireland
Subcontracting (contracting out) – Businesses are now spending more time contracting out jobs such as cleaning, security, maintenance etc.
Franchising – The renting of a successful business formula is a common route to becoming a LARGER company. Examples include SUPERMACS, THE BODY SHOP

20. d) Privatisation of state owned companies
This means the selling of some or all of the shares in state –owned company to private investors.
Examples: GREENCORE, IRISH LIFE
e) Agricultural co-ops turning into PLC’s
PLC’S are companies that only sell shares on the stock exchange. This makes it easier to raise much needed finance for future business developments. In recent years agricultural co-ops have become PLC’s
Example: KERRY GROUP

21. 8. WHY HAVE AGRICULTURAL CO-OP’S TURNED INTO PLC’s ?
With the international food industry getting very competitive Irish agricultural co-ops have become increasingly competitive.
To be able to spend large sums of money on R & D has enabled these co-ops to increase their economies of scale.
Existing Problems:
The limit to equity/investors: agricultural co-ops are owned by farmers. Under the laws governing co-ops there is a limit on the amount of shares each individual shareholder can have. As only farmers can hold shares it makes it difficult to raise finance.
Limit to borrowings: borrowing large sums of money would be high risk.

22. Solutions to the problems:
set up a PLC company on the stock market
Transfer ownership of some of the co-ops business assets to the PLC.
The farmers own the co-op and the co-op has shares on the stock market
When they need finance the sell shares on the stock market. They always retain a 51% share to keep the majority of the company.
Examples:
Kerry group, Golden Vale , Avonmore co-ops
NB: building societies are now following the trend of these co-ops in raising finance on the stock market

23. 9. WHY DO BUSINESSES CHANGE THEIR LEGAL STRUCTURE OVER TIME?
Unlimited liability
Limited liability
Sole trader
Partnership
State owned Comp.
State owned Comp.
Private Ltd
Comp / Co-op
PLC Comp.
PLC Comp.

24. Businesses change their Business Structure from Sole Trader to Partnership to Private Limited Company to a PLC because:
It helps them bring in new skills, experience, resources
It reduces risk as the sole trader or the partners can now enjoy limited liability
Helps to raise finance through investors, stock exchange etc. for future expansion

25. Helps to market the company
Helps to market the company. Being a limited company enhances the image of the business. This adds to the reputation of the company as advertising and promotions will be more convincing to the intended customers.
Business profit prestige- changing a co-op owned company to a PLC offers the management and employees a stronger allegiance to making profit rather than operating for the goodwill of the local area farmers etc.

26. THANK YOU