Bussines environment - Assignment Example

I will try to provide the information as per my knowledge and understanding. LO 1.1 Generally, business organisations can be broadly segregated as public sector organisations and private sector organisations. The organisations that are owned and run by the government are termed as public sector organisation (Adams & Periton, 2006, p.86). The organisations where the ownership lies with private owners are called the private sector organisations. These private sectors organisations can run the business either with the motto of earning profit or they can be non-profit making organisations that do not conduct the business for monetary gains (Beamish & Ashford, 2006, p.256). Before discussing different type of profit making organisations, I would like to explain the main purpose of non-profit making organisations.

Generally, these organisations intend to provide services. While organisations like clubs and societies provide facilities and entertainment services to its members, charities offer services to a particular group of people in the society who need help and assistance. These charities may also be involved with environment related issues (Lunt, 2010, p.9). The private organisations can be segregated into four broad categories. These are: sole proprietorship, partnership, private limited company and public limited company.

The organisations and their purposes are explained as followed: Sole proprietorship: Such a business is owned by a single person, so he/she is the ‘Boss’. The owner of the business is solely responsible for raising capital and combining all the resources required for production. Thus, the owner enjoys the profit earned by the business. This business is not a legal entity, so the owner has unlimited liabilities. Due to limitation in availability of capital, these businesses are comparatively smaller in size.

The main purpose of sole proprietorship is to earn profit and thus it has limited role in social development (Minars, 2003, p.6). Partnership: As per the definition provided by Uniform Partnership Act, “the association of two or more persons to carry on as co-owners of a business for profit, forms a partnership, whether or not the persons intend to form a partnership” (Spadaccini, 2007, p.5). Such business organisation enjoys immense freedom and simplicity in terms of starting and operating the business.

The partners may agree to start a partnership firm even with an oral agreement but this often results in misunderstanding and dispute. Therefore, it is advisable to maintain a formal written agreement that specifies all the terms and conditions. This type of business firm diversifies the business risk and the partners enjoy certain tax benefits. As the business does not result in formation of a separate entity, therefore the partners have unlimited liability. Such businesses do not contribute much to the society because the main purpose is earning profit (Spadaccini, 2007, p.5-6). Private limited: A private limited company is a legal entity which has limitation on the number of owners.

Restriction is also on transfer of shares. The company cannot raise fund by public subscription (equity shares and debentures). The firm has to specify its area of activity in the article of association. However, it enjoys certain degree of liberty as it does not have to disclose all the financial information publicly (Morse, 2007, p.58). The main purpose