CHAPTER 6 TYPES OF BUSINESS & ORGANIZATIONAL STRUCTURE

Chapter 06: Types of Businesses & Organisation Structure

1. Learning Objectives

• Types of Business Organisations

  • Define and examine the advantages and disadvantages of the sole proprietorship form of organization.

  • Identify two types of partnership and evaluate their advantages and disadvantages.

  • Describe the corporate form of organization and cite its advantages and disadvantages.

• Organisational Design & Structure

  • Define organizational culture and structure, and explain their relationship in developing organizational structures.

  • Describe how specialization and departmentalization help achieve organizational goals.

  • Determine how organizations assign responsibility and delegate authority.

  • Compare and contrast common forms of organizational structure.

2. Types of Organisations

2.1 Business Ownership

• Categories of Business Ownership:

  • Two categories:

    • Private:

      • Owned by individuals or partners.

    • Public:

      • Owned by the government.

  • Four types of ownership:

    • Sole Proprietorship

    • Partnership

    • Private Limited Company

    • Public Limited Company

3. Business Ownership in a Mixed Economy (Malaysia)

• Mixed Economy Characteristics:

  • Balance of private and government-owned resources.

  • Private Sector:

    • Unlimited liability:

      • Sole Proprietorship (1 owner)

      • Partnership (2-20 owners)

      • Companies (limited liability):

        • Private Limited Company (2-20 owners)

        • Public Limited Company (2 to unlimited owners)

  • Public Sector:

    • Owned and operated by the government.

4. Definition of Business

• A business is organized for trading products and services to customers for profit.

• Majority are privately owned and operated, often facing unlimited liability.

5. Sole Proprietorship

5.1 Characteristics

• One owner; must be a Malaysian citizen or permanent resident.

• Must register with the Registrar of Business (ROB) in Malaysia.

5.2 Examples

• Ramly Burger Stall

• Nasi Lemak Stall

• Dog Walking Services

• Babysitting Services

6. Partnership

6.1 Characteristics

• Comprises two to twenty partners who combine resources to operate.

• Requires registration with the Registrar of Companies (ROC).

• A partnership agreement is usually created, not taxed as an entity but taxed at the individual level for partners.

7. Corporations

7.1 Characteristics

• Organizations formed for profit by providing services or products.

• Key Distinctions from Businesses:

  • Limited liability protection for owners.

  • Corporations are separate legal entities from their owners.

7.2 Types of Companies

• Private Limited Company (Pte. Ltd./Sdn. Bhd.):

  • Cannot publicly offer shares.

• Public Limited Company (Plc/Bhd.):

  • Can issue shares to the public and trade them on the stock exchange.

  • Required by law to disclose financial accounts.

8. Characteristics of Business and Companies (Comparison)

8.1 Legal Status

• Sole Proprietorship / General Partnership:

  • Not a separate legal entity; owners have unlimited liability.

• Companies (Sdn. Bhd./Plc):

  • Separate legal entities; limited liability protection.

8.2 Management and Liability Responsibilities

• Owners of businesses manage directly whereas companies appoint a Board of Directors.

• Sole proprietors and partners carry unlimited liability; directors/shareholders in companies only liable up to their unpaid shares.

9. Organisational Design

• Definition:

  • The structure of relationships among staff.

• Organisational Culture:

  • Shared values and practices influencing workflow.

• Organisational Structure:

  • Distribution, coordination, and integration of work across teams.

10. Task Assignment and Authority

• Delegation of Authority:

  • Authority is granted from superiors to subordinates, including responsibility for tasks.

  • Accountability for performance outcomes falls on delegates.

11. Centralisation vs Decentralisation

• Centralisation:

  • Concentrates authority at the top levels with little delegation.

• Decentralisation:

  • Delegates decision-making authority throughout the organization.

12. Span of Control

12.1 Types

• Wide Span of Control:

  • Fewer organizational layers; decentralized decision-making.

• Narrow Span of Control:

  • Many layers; centralized decision-making.

13. Forms of Organisational Structure

• Line Structure:

  • Direct authority from top to bottom.

• Line-and-Staff Structure:

  • Includes specialized managers assisting line managers.

• Multidivisional Structure:

  • Groups departments into larger divisions.

• Matrix Structure:

  • Integrates team members from different departments to collaborate on projects.