Understanding Types of Business Organisations

When starting a business, choosing the right organisational structure is crucial. Each type comes with unique responsibilities, benefits, and challenges. Here’s a quick guide:

Public Sector Organisations

• Run by the government to deliver essential services like healthcare, education, and policing.
• Funded through taxes and national insurance.
• Not profit‑driven, focused on public welfare.

Voluntary & Not‑for‑Profit Organisations

• Includes charities and community groups.
• Aim to serve society rather than generate profit.
• Registered charities must comply with the Charities Act, file annual returns, and are exempt from corporation tax.
• Managed by trustees who ensure compliance and accountability.

Private Sector Organisations

These are profit‑oriented and can be structured in different ways:

Sole Traders

• Owned and run by one individual.
• Simple to set up, low costs, and full control.
• Unlimited liability: personal assets may cover business debts.
• Limited growth potential and challenges in raising capital.

Partnerships

• Owned by two or more people.
• Governed by the Partnership Act 1890 or a partnership agreement.
• Profits shared according to agreed ratios.
• Advantages: pooled expertise, shared workload, easier access to funds.
• Disadvantages: unlimited liability, potential disputes, and reliance on partners’ circumstances.

Limited Companies

• Separate legal entities distinct from their owners (shareholders).
• Liability is limited to the company’s resources.
• Private Limited Companies (Ltd): Shares not publicly traded, flexible ownership.
• Public Limited Companies (Plc): Shares traded on stock exchanges, stricter requirements, minimum £50,000 share capital.
• Limited Liability Partnerships (LLP): Hybrid structure offering limited liability with partnership flexibility, popular among professionals.

 Pros & Cons of Limited Companies

• Pros: Limited liability, easier to raise finance, continuity, transferable shares.
• Cons: Complex regulations, mandatory public accounts, audits, and compliance with the Companies Act 2006.

 Rights of Shareholders

Under the Companies Act 2006, shareholders can:

• Vote at general meetings.
• Receive share certificates.
• Inspect registers and directors’ service contracts.

Test Your Knowledge With These Exercises!