Business Organizations: Structures & Key Concepts

Chapter 3: Business Organizations

There are five main forms of business organizations in the private sector:

1. Sole Traders
2. Partnerships
3. Private Limited Companies (PLCs)
4. Public Limited Companies (Ltd.)
5. Co-operatives

Key Business Terms

Limited Liability: This term refers to the owners of a company (shareholders). They are not held responsible for the debts of the company they own. Their liability is limited to the investment they made in buying the shares.

Partnership Agreement: A written and legal agreement between business partners. While not essential, it is always recommended.

Sole Traders: The most common form of business organization. It is a business owned and operated by one person.

Partnerships: A group or association between 2 and 20 people who agree to own and run a business together.

Unincorporated Business: A business that does not have a separate legal identity (e.g., sole traders and partnerships).

Shareholders: The owners of a limited company. They buy shares, which represent part ownership of a company.

Prospectus: A detailed document issued by the directors of a company when converting to public limited company status. It invites the general public to buy shares in the newly formed PLC.

Annual General Meeting (AGM): A legal requirement for all companies. All shareholders may attend and vote on who they want on the board of directors for the coming year.

Dividends: Payments made to shareholders from the profits of a company after it has paid corporation tax. They are the returns to the shareholders for investing in the company.

Other Private Sector Organizations

There are two other organizations in the private sector:

1. Close Corporations
2. Joint Ventures

Franchise: A business that uses the brand names, promotional logos, and trading methods of an existing, successful business. The franchisee buys the license to operate this business from the franchisor.

Public Sector Organizations

There are two main types of business organizations in the public sector:

1. Public Corporations
2. Municipal Enterprises