Business Studies

IGCSE O Level
Unit1: General
Chapter 3.Forms of business organizations

Made by: Nadine Mouhasseb

Facebook page: https://www.facebook.com/IGBusinessTutorAlex/
Contact e-mail: nde89@hotmail.com

In this ppt, were going to learn about (9 different forms of

business organisations):

Private businesses (owned by people) [8]

Limited liability (sole trader, partnership)

Unlimited liability (private limited company, public limited company, others [4])

Public corporations (owned by the government) [1]

Nadine Mouhasseb

Facebook page: https://www.facebook.com/IGBusinessTutorAlex/

e-mail: nde89@hotmail.com

Private businesses (owned by people) [8]

Unlimited liability (unincorporated)
Def: Unlimited liability Owner is responsible for debts.
Unincorporated If the owner dies, the business is taken.
Types: according to owner:
1. Sole Trader
Adv.:
1.
2.
3.
4.
5.

Regulations:
Boss:
Freedom:
Customers:
Profit:

Limited
Own boss

Close to owner
For him only

2. Partnership
Partnership agreement
Many owners (2 to 20)
x
x
Shared

Disadv.:
1.
2.
3.
4.
5.
6.
7.

Responsibility:
Finance:
Help:
Size of bus.:
Death:
Skills & knowledge:
Decisions making:

on him only
on him only
x
smaller
business taken
limited
alone

Shared
Shared
available
bigger
business taken
more skills/knowledge
arguments in making decisions
but can take better discussed decisions

Private businesses (owned by people) [8]

Limited liability (corporated)

Def: Limited liability Shareholders are not responsible for debts.
Incorporated If the owner dies, the business is not taken.
3. Private Limited Company

4. Public Limited Company (PLC)

Others

Feature:
Owner: Owner + shareholders
< large, well-known to public
Regulations: Many legal agreements
< more complicated agreements to protect shareholders
Accounts: Accounts of the company are separate from the accounts of the shareholders. (For both)
Adv.:
1. Selling shares: To many people capital
< no limit
2. Liability: Limited liability, shareholders are not responsible for debts (For both).
3. Control: Shareholders can control business.
Shareholders do not control business, they only elect
the company directors during annual meetings.
Disadv.:
1.
2.
3.
4.

Legal matters: Articles of Association (Rules of Bus.) (For both). Memorandum of association (Info. on company and direction) (For both).
Accounts: Not secret, known by the government. (For both).
Selling shares: cannot be done without agreement
no restriction
Capital: Cannot have large capital.
no maximum
Converting from private limited company PLC (Public Limited Company)
1. Announce in Memorandum of Association
2. Issue minimum share amount
3. Accounts must be available to public.

Private businesses (owned by people) [8]

Types of business organizations (Continuation)
I.

Private
Others [4]:

II. Public

5. Cooperatives: Def: People agree to work together and pool their resources.
Features (3): - People have one vote. - Decisions and work are shared. -Profit is shared.
6. Joint Ventures: Def: When two or more businesses agree to start a new project together.
Adv. (2): costs and workload
Disad. (2): - profit is shared. Disagreements in managing
7. Franchising: Def: A business with a product or service idea that it does not want to sell to consumers directly.
Adv. to franchisor (2): - Expansion for shop and license to use product name purchased by franchisee.
- Operating retail units (management problems) belong to franchisee.
Adv. to franchisee (6): - Chance of bus. failure is reduced.
- Advertising is paid for by the franchisor.
- Supplies obtained from franchisor. - Decisions like the dcor of the restaurant are made by the franchisor.
- Training and management is provided by the franchisor.
- Banks are prepared to lend money to franchisees.
8. Social enterprise: Def. a business with social objectives. It reinvests most of its profits back into the business or use it to benefit society as a large (purpose is
the common good). Types: limited company, charity organization, cooperative, industry, sole trader or partnership.
Characteristics: 1. Mission clear in official documents. 2. Generate income through trade. 3. Reinvests majority of profit 4. Controlled by interest of social
mission
5. Accountable and transparent.
Benefits for employees: 1. Fiscal responsibility: make employees self-sufficient by giving them enough money.
2. Public Safety: make community safer by poverty,
crime and homelessness.
3. Economic opportunity: human capital by creating jobs in need of economic renewal.
4. Social justice: chance to those most in need.
Objectives (social objectives): 1. Benefit Employees 2. Profit reinvested in business
3. Relates to the needs of the local community/ care for the environment

Some more images of a social enterprise

Nadine Mouhasseb

e-mail: nde89@hotmail.com

Public corporations (owned by the government) [1]

Types of business organizations (Continuation)
I.

Private

II. Public
1. Public corporations:
Nationalized bus. (owned by private individuals but purchased by gov.)
managed by Board of Directors.
Objectives: 1. Prices for affording the service by the public.
2. jobs
3. Offer services to the public
If objectives cause loss, the gov. might change them:
1. Jobs
2. Efficiency to gain money
3. Loss making services
Adv. (3): - Provide important non-profitable services
- Ensure that customer is not taken adv. of by monopoly
- Nationalizing ensures jobs.
Disadv. (4): - No shareholders.
- Subsidies management efficiency
- competition
- Used for political reasons (create job vacancies before election.)

Nadine Mouhasseb

e-mail: nde89@hotmail.com

Exam style questions:

1. Direct questions:
Definitions (of diff organization types/ forms of business: sole trader, partnership)
E.g. What is meant by a partnership?
What is meant by a limited company?
Give a full definition for 2 marks.
e.g. A limited company is a business that has been incorporated and whose owners have limited liability.
e.g. A partnership is where two or more people jointly agree to own the business

2. Make decisions in situations like: (For 6 marks in paper 1: Always try to give a balanced in the middle
answer.)
- Is it better for a specific business to continue operating as a sole trader or it should take partners?
- Is it a good idea for a specific business to make a joint venture with another one?
Adv. share ideas, expertise, assets, wide range of contacts, output
Disadv. share profit, if fails (can ruin business reputation/image)
- Is it a good idea for a partnership to convert to a private limited company?
Adv. growth, capital, incorporation, competition
Disadv. in profits is not guaranteed
Nadine Mouhasseb

e-mail: nde89@hotmail.com