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.