CAT / FIA FBT Syllabus A. The Business Organisation, Its Stakeholders - Types of Business Organisation - Notes ^{5 / 5}

Commercial organisations

A very important difference within the structure of organisations is the difference between profit orientated (Commercial) and non-profit orientated organisations. 

There is also a distinction between their primary and secondary goals. 

The secondary goals exist to support the primary goal.

The primary goal of a profit making company is to maximise shareholders’ wealth.

Business organisations come in all different shapes and sizes including sole traders, partnerships and LTD.

Limited companies

A Limited company has a separate legal personality from its owners (shareholders).  

The shareholders cannot normally be sued for the debts of the business unless they have given some personal guarantee.  

Their risk is generally restricted to the amount that they have invested in the company when buying the shares (limited liability).

• The ownership and control of a limited company are legally separate.

• Shareholders are the owners but have limited rights over the day to day running of the company. 

  They provide capital and receive a return. 

  Shareholders could be large institutional investors (such as insurance companies and pension funds), private individuals, or employees.

• Directors are appointed by shareholders to run the company. 

  Executive directors participate in the daily operations of the organisation and 

  Non-executive directors are independent and are not involved in the day to day running of the business. They are invited to join in an advisory capacity to exercise overall guidance.

Co-operatives

Co-operatives are organisations in which there are members, and all members:

1. are actively involved in its activities, and

2. share in the benefits that the co-operative provides.

Mutual Associations

• A mutual association or organisation is owned by the member/clients that such organisation exists for.  

  Generally mutual organisations deal with intangible products such as financial services, example, ACCA

Not-for-profit organisations

A non-profit organisation (NFP) works with a prime intention (primary goal) of providing a good or a service to different sectors of society for which they are set up to provide a benefit.

• For example, a school is set up to provide education.  

  Charities, such as, the Red Cross is set up to provide a medical service.

Public Sector

Public Sector organisations are owned or run by the government. They are funded by and accountable to the government.  

A major challenge that any government faces is that of balancing their limited resources with a huge demand for public services.

Examples of a public sector organisation are:

1. Hospitals

2. Armed Forces

3. Centrally funded agencies

4. Most schools & Universities

5. Government Departments

Non-governmental organisations (NGO's)

• A non-governmental organisation is an independent voluntary association of people acting together for some common purposes. 

  These organisations often support such things as: conservation issues, environmental change etc.