III. Business organisations

Structure of the Chapter:

Introduction:

Organisation is an arrangement of parts of a group to form an effective whole (Collins Business English Dictionary). After studying this chapter, students should be able to define the essential features of non-incorporated organisations, incorporated organisations and not-for-profit organisations, describe how limited liability and unlimited liability work.

 

Key Words:

Sole proprietor - the form of business organisation in which one person is the sole owner and has unlimited liability
Partnership - an agreement between two or more people to share in a business together
Private limited company - a company whose shares cannot be bought on the Stock Exchange
Public limited company - a company whose shares can be bought by the public
Holding company - a company which controls one or more companies by owning more than half of the ordinary shares in them
Limited liability - shareholders are only responsible for the debts of the company to the limit of the money they have invested in it
Unlimited liability - a situation where each member of a company is legally responsible for his share of the total debts of the company
Submit - to give something to a person, e.g. for a decision
Recognize - to acknowledge
Sue - to make a legal claim against
Board of Directors - a group of senior executives of a company who are responsible for directing the policy of the company and who have the final powers of control within the company
Shareholder - a person who owns shares in a company
Failure - bankruptcy
Asset – anything owned by a person, company, etc that has money value and that may be sold to pay debts
Articles of association – the rules and conditions covering the relationship between a company, its shareholders and its directors
Memorandum of association – a document drawn up when a company is formed which lists: its name, where the head office is, its aims, the amount of capital, the directors, etc.

Pre-reading Tasks:

What things have all business organisations in common?
What types of business organisations do you know?
What type of organisation would you like to work?
What kind of work would you like to do in this organisation?
If you are already working:

Specialist text:

Types of Business Organisations

1. Non - incorporated organisations:

Sole Proprietor

A sole proprietor is usually a single person carrying out a business in a one-person or a very small organization. There is no legal limit to the number of people that sole proprietors can employ. Common examples of sole proprietors are as follows: tradespeople (electrificians, painters), market stall holders, window cleaners, small independent retailers etc. The sole proprietor has unlimited liability. This means that he is liable for all of the business losses from his own personal assets without limit.

Partnership

According to The Partnership Act 1890 a partnership is defined as the relationship which subsists between persons carrying on a business with a view to profit. It is not incorporated and therefore has unlimited liability. It is an arrangement in which not less than two and usually not more than twenty people come together for the purposes of carrying out a business. Typical examples of partnership arrangements are architects, accountants, lawyers, solicitors, consultants etc.

2.Incorporated organisations:

Incorporated organisations are recognized as separate legal entities - they are registered, can sue or be sued and have limited liability. It means that the members of the company would not be liable for the business debts in the case of company failure. If the company fails, they lose the money they invested in the business, not personal assets. Limited companies can be classified according to who owns (or has access to own) the shares of the business.

Private Limited Company (Ltd)

Ltd is a company in which the shares are owned by a number of private individuals. The shares are not available for sale except with the permission of the shareholders and the Board of Directors of the company. Examples of such units are wholesale firms, large scale firms, service occupations such as advertising etc.

Public Limited Company (Plc)

Plc is a company in which the public has access to the shares. These are bought and sold through the Stock Exchange. Examples are department and chain stores, oil companies, brewery, construction and mining companies etc.

A special example of a limited company is a holding company It does not provide a product or service itself but simply owns other companies who do. This is a common form of organisation for very large companies - usually Plc´s. In exchange for a company benefiting from the advantages of limited liability, the law requires that certain conditions are met. The conditions state that all limited companies must submit the following documents:

These documents are filed at Companies House, an executive agency of the Department of Trade and Industry, whose role is to regulate and control all limited companies by approving their incorporation and dissolving them.

3. Non - profit organisations:

Many organisations exist for other purpose than the generation of profit. These are commonly referred to as non - profit organisations.

Cooperatives

The cooperative principle is that at the year end, the amount of money that would be paid out in dividends to shareholders is paid out instead to the cooperative members - the customers - in proportion with the amount they have spent in the shop.

Government Departments (=Public Enterprises)

They are funded by government, largely from taxation revenues. They are not aimed solely at making profit, but can be operated for the benefit of the public.

The goods and services provided by government departments fall into two categories:

Public goods: Merit goods:

Comprehension questions:

  1. What is the difference between incorporated and non-incorporated organisations?
  2. How can you characterise a Public limited company?
  3. What documents must all limited companies submit?
  4. What are the goods and services provided by government departments?

Activities:

I. Decide whether the following statements are true or false:

  1. The sole proprietor has a limited liability.
  2. Typical examples of partnership arrangements are accountants, lawyers, consultants etc.
  3. Shares of a public limited company are freely transferable between buyers and sellers.
  4. Government departments are aimed solely at making profit.
  5. Limited liability means that an owner´s liability is limited to the investment made.
  6. The essence of the cooperatives is that the owners are the customers.

II. Replace the underlined words in the following sentences with their synonyms or words with similar meaning:

  1. The members of the organisation have common goals.
  2. In a typical limited company the central coordination will be carried out by the Board of Directors.
  3. A formal organisational structure will enable an efficient communication network to be established.
  4. Anybody can be a sole proprietor simply by commencing business transactions in an informal manner
  5. As there is more than one person in a partnership, decisions are reached by consultation between partners.
  6. There are lots of important people involved in the operation of a limited company.
  7. Companies can raise extra money by issuing more shares for sale.
  8. By giving a member of staff a little responsibility, he learns how to exercise it.
  9. Some organisations have management that insists on making all key decisions from the centre.
  10. It is likely that divisional managers know best how to act in their own local sphere of responsibility.

III. Choose the correct words to complete the sentences:

  1. The partnership is another form of business organisation frequently used in free market
    (1) economics, economies, economic.
  2. If your partner runs up heavy (2) debentures, profits, debts,/u> you are stuck with the bill.
  3. It is difficult for a sole trader to (3) compete, comprehend, compile with large firms..
  4. Shares can be transferred only with the (4) advertisement, agreement, ambitions of other shareholders.
  5. The need to (5) expand, expect, extract causes some to form a partnership.
  6. The business is not recognised as a separate legal (6) endeavour, entity, expense.
  7. The investors were (7) reluctant, response, refer to enter into partnership.
  8. By giving a member of staff a little responsibility, he learns how to exercise it.
  9. If the business failed, they would not be personally (8) likely, liable, limited for business debts.


VI. Quiz

Look at the sentences below and choose the right answer.
1. Business undertakings in the UK are organised under different kinds of
  1. ownership
  2. partnership
  3. friendship
2. A Plc is a corporate body comprising the
  1. joint stock of all the members forming it.
  2. services of all the members forming it.
  3. firms of all the members forming it.
3. Its
  1. structures
  2. succession
  3. shares
are freely transferable between buyers and sellers.
4. A Plc can appeal to the public for more capital by means of shares and
  1. dealings
  2. debentures
  3. discounts
5. The cooperative principle is that
  1. at the year end the amount of money is paid out in dividends to shareholders
  2. at the year end the amount of money is paid out to the cooperative members
  3. at the beginning of the year the amount of money is paid out to shareholders
6. Public enterprise is run in the
  1. profit of the public
  2. interest of the public
  3. proceeds of the public
7. Incorporated organisations are registered and have
  1. unlimited liability
  2. limited liability
  3. public limited liability
8. All limited companies must submit the articles of
  1. association
  2. accounts
  3. regulation
9. A sole proprietor is liable for all of the business losses from his personal
  1. liabilities
  2. debts
  3. assets
without limit.
10. Partnership
  1. is not
  2. is
  3. has
incorporated and has unlimited liability.

Summary:

This chapter deals with the basic types of business organisations - incorporated and non-incorporated business organisations, non-profit making organisations and their goods and services. It explains what is meant by limited and unlimited liability and what is a holding company.

Literature:

Campbell: Business for Non-Business Students, DP Publications 1994 Chilver: English for Business, Ashford Colour Press 1992
J. Wallace, P. J. Flynn: Collins Business English Dictionary, HarperCollins Publishers 1991


Checks:

Comprehension Check:

  1. 1.Incorporated organisations are recognised as separate legal entities and have limited liability. It means that the members of the company would not be liable for the business debts in the case of a company failure. Non-incorporated organisations have unlimited liability which means that they are liable for all of the business losses from their own personal assets without limit.
  2. 2.Plc is a company in which the public has access to the shares that are bought and sold through the Stock Exchange.
  3. 3.Memorandum of association
    Articles of association
    Annual audited accounts
  4. .Defence, police, transport, health service, social security and unemployment benefits, education

Check I:

F, T, T, F, T, T

Check II:

  1. aims, objectives
  2. realised, effected
  3. effective, well functioning
  4. starting, beginning
  5. achieved
  6. engaged in
  7. an employee
  8. essential, main, crucial
  9. is expected

Check III:

  1. economies
  2. debts
  3. compete
  4. agreement
  5. expand
  6. entity
  7. reluctant
  8. liable

Check IV:

1. a, 2. a, 3. c. 4. b, 5. b, 6. b, 7. b, 8. a, 9. c, 10. a