1.2 Types of Organizations
Private & Public Sectors
Private Sector Businesses
- goal is profit-maximization
- owned and controlled by private individuals and businesses
- Examples:
- Law firms
- Estate agents
- Newspapers or magazines
- Financial Services
Public Sector Businesses
- provides essential goods and services that is inefficiently being provided by the private sector
- owned and controlled by the government
- Examples:
- Healthcare
- Public Education
- Museums
- Armed forces
Profit-Based Organizations
Sole Trader
- business is owned and controlled by one person
- the simplest form of businesses
- owned by a single owner who takes all profits and liabilities
| Advantages | Disadvantages |
|---|
| financial strength, more start-up capital | unlimited liability |
| shared responsibility | slower decision making |
| less pressure | disagreements & conflicts |
Companies/Corporations
- businesses owned by shareholders, those who have invested money to provide capital for a company
- there is a legal difference between the owners’ and the business’ identity
- Limited Liability - shareholders only lose the value of their investment, not their personal belongings
- more bureaucracy
- two types: Private & Public
Private Limited Company:
- shareholders are usually family, friends, and business partners
- shares are not traded on a public stock exchange
- unless elected to the Board of Directors; the shareholders aren’t involved in running the business
| Advantages | Disadvantages |
|---|
| limited liability | more legal restrictions |
| higher capital, expansion capacity | corporate taxes |
| no limit on the number of shareholders | profit has to be shared among many people |
Public Limited Company:
- shared are traded on a public stock exchange
- required to publish financial accounts and reports to the public
| Advantages | Disadvantages |
|---|
| limited liability | vulnerable to takeovers |
| more capital, expansion capacity | value of shares can go down |
| shares can be bought and sold easily | rules and restrictions |
| value of shares can increase | expensive to set up |
For-Profit Social Enterprises
Social Enterprises: Revenue generating businesses with social objectives at the core of their objectives
- Main Goals:
- to achieve social objectives
- earn revenue in excess of costs
Cooperatives
- jointly owned and run by members who share profits and benefits
| Consumer Cooperatives | Worker Cooperatives | Produces Cooperatives |
|---|
| owned by the customers who buy the goods and/or services for personal use | set up, owned, and organized by their employee members | join and support each other to process or market their product |
| Advantages | Disadvantages |
|---|
| incentives to work | limited sources of finance |
| social benefits | slower decision-making |
| public support | limited promotional opportunities |
Microfinance Providers
- small loan providers to poor businesses who have no access to conventional banking services
| Advantages | Disadvantages |
|---|
| job creation | limited finance |
| social well-being | limited eligibility |
Public-Private Partnerships [PPP]
- government jointly works with the private sector companies
| Advantages | Disadvantages |
|---|
| more productive while also proving merit goods | government must support financially when costs increase for the business |
| conflict between public & private sector intents & goods |
Non-Profit Social Enterprises
- organizations operating for public welfare, not profit
- exempt from many taxes
Non-Governmental Organizations [NGOs]
- exists in the private sector
- participates in humanitarian, educational projects, etc
Charities
- non-profit organization that is exempted from taxes
- charitable objectives
- reducing poverty
- environmental degradation
| Advantages | Disadvantages |
|---|
| social benefits | bureaucracy |
| tax exemptions | charity frauds exist |
| public recognition | limited sources of finance |
| limited liability | disincentive effects |