Types of Organizations - Essay Example

Running Head: Types of Organizations Types of Organizations [Institute’s Types of Organizations Introduction The paper is an attempt to shed some light on the different types of organizations in the United Kingdom construction sector. This paper would start talking briefly about the construction sector and its importance in United Kingdom’s economy. As soon as this paper enters in to its discussion portion, it would highlight the different types of firms in this sector and try to achieve the main goal of discussion of this paper. The approach would be to discuss each type of organization in detail followed its relevant match and relation in the construction industry of United Kingdom. Without any doubts, United Kingdom is one of the most influential economies on this planet today. According to the official statistics, United Kingdom has the sixth rank in the list of economies placed according to their nominal GDP. Moreover, United Kingdom is the fourth country when ranked according to Gross National Income. United Kingdom holds the title of the first country that moved towards mass level industrialization as early as in the 16th century, and it still has its say in the world economic play being the member of G-8, G-7, G-20, European Union, OECD and WTO. The United Kingdom’s economic gurus understand the fact that their supremacy in the world economy due to their three major sector which contribute heavily to the GDP of the country, services, industry, and agriculture mainly. Industry contributes almost 18 percent to the GDP and more importantly, a significant 5 percent out of this 18 percent share comes from the construction sector of the United Kingdom. In other words, construction sector of the United Kingdom contributes around 28 percent to the UK industry. Recent statistics reveal that it makes a significant 9.2 percent of the nations Gross Value Added (GVA). Moreover, there are more than 250,000 firms in the construction sector employing millions of people (Organisation for Economic Co-operation and Development, pp. 159-163, 2002). However, the recent recession has hit the industry very hard as it has hit the other sector too. Moreover, news from December 2009 suggests that this industry has contracted for consecutive 21 months. However, the rate of declining has been the lowest and is steadily decreasing (Murchie, 2009). It indicates a couple of things. Firstly, that the construction is one of the few sectors that have witnessed least damage by recession and the sector is on its road to recovery. The paper would now move forward by discussing by discussing the major types of organizations amongst these more than 250,000 in the important construction sector of United Kingdom. Discussion The simplest type of organization is the sole-trader firm. At times referred as sole proprietor or proprietorship, these firms have a single owner and that owner is self-employed. That one person is the responsible for dealing with all the issues, operations, and responsibilities of the business. The owner assumes the responsibility for paying all the debts and putting all the profits in his pocket. The problem for the sole trader is that if his business or firm goes bankrupt or goes technically or legally solvent at any point in time then the owner would have to pay the liability from his pocket by either liquidating or selling off his assets (Sealy & Worthington, pp. 9-18, 2007). Unlike other forms of business, the sole trader does not enjoy the status of a “separate legal entity” for its firm (Hicks & Goo, pp. 52-57, 2008). In other words, the sole trader has unlimited liability for its business. In the same regard, even if the company faces some other charges, allegations, claims, or legal proceedings against itself then it the owner would be accountable for it and not the company. Despite the fact that these type of businesses are easy to start as 123 since it does not require legal paper work and other requirements but these businesses are at times, very difficult to carry on. This is because of the fact that sole trader finds it difficult to raise their capital because the option of equity financing is just not there for them (Hicks & Goo, pp. 52-57, 2008). Moreover, as far as debt financing is concerned, the difficulty remains there because the sole trader would have to put his personal assets on guarantee and the he would receive loan under his name and not under the name of his company. According to official statistics, more than 71 percent of the British businesses are sole trader and they very much are responsibly for the economic growth of the country (Organisation for Economic Co-operation and Development, pp. 159-163, 2002). Even in the construction industry, countless and majority of the businesses are sole traders with one person doing the entire job under his or her own name. Most common example is the repair and maintenance people. It is a very common to read a word of “Limited” at the end of any company. The word limited indicates the fact that all the owners, members, or shareholders of the company have limited liability to losses or debts of the company. The business can be “Limited by shares” or “Limited by guarantee” (Hicks & Goo, pp. 52-57, 2008). The discussion starts with limited by shares companies since they dominant in numbers. These businesses normally run by appointing a board of directors who are the major stockholders in the company or representative of the shareholders of the company. These businesses mostly do not suffer with the problem of financing the company because there are many people who are ready to invest their money in the company in form of shares. These businesses usually have all the legal protection and backing. Moreover, these businesses also enjoy the status of “separate legal entity” and the company is separate from its owners. “A limited company can be either a private limited company or a public limited company” (Sealy & Worthington, pp. 9-18, 2007). There major difference being that the former cannot trade their shares in public and do not have to disclose all of their documents to the public. However, the shares of a public company are open to the public, easy to attain and all their documents such as memorandum of association, articles of association, annual accounts, income statements, balance sheets, and others are open to the public, investors, and potential investors (Sealy & Worthington, pp. 9-18, 2007). So many names in the United Kingdom’s construction industry fulfill the description of a limited company. For example, “BDB dismantling Ltd, A.D. Scott Asbestos Consultancy Ltd, Alliance Asbestos Services Ltd, Exroc UK Ltd, N and R demolitions Ltd, Maylarch Environmental Ltd, Hunsdon Skips Ltd, Mobile Sandblasting Ltd, Approved Access Scaffolding Ltd, CH Middleton Ltd, Homeupdate Ltd, RP Drilling Ltd and Canonbury Estates Ltd.” Other names include “Cardiff Scaffolding Contracts Ltd, Wade Consultants Ltd, Skeer Environmental Surveying Solutions Ltd, Essex County Skips Ltd, SRC Construction & Paving Ltd, WM drilling Services Ltd, Abra Training Ltd, and Wills Gee Ltd “are few other examples. As mentioned in the former paragraph of this paper that companies that are limited by guarantee also exist in United Kingdom. These are usually private and not-for profit organizations and usually one or more investors or donors assume the responsibility of the company on their personal guarantee (Griffin, pp. 12-21, 2006). In the case of the organizations unable to pay its debts, those people would pay the debts of the firm from their own pocket. There are not much examples of this type of companies in the United Kingdom’s construction sector because they are all for profit organizations. United Kingdom’s construction sectors also have firms that are “limited partnerships.” There has been enough explanation provided for the word limited and its implications but partnerships require a bit of discussion. “Partnerships are also one form of business where two or more partners or owners set up a business are ready to share the profits and the losses according to a pre-determined percentage” (Griffin, pp. 12-21, 2006). These types of businesses are favored over corporations because of their flexibility, tax obligations and less paper work. However, the partners face unlimited liability in some means. For example, if there were two partners and one runs away then the other would be liable to pay his debts as well. The basis of these businesses is trust and is the trusts breaks the other members would have to pay a heavy price. According to the “United Kingdom Limited Partnership Act of 1907, a limited partnership would have two types of partners: limited and general partners” (Griffin, pp. 12-21, 2006). Limited partners are the ones who contribute a fixed sum of amount in the business. They receive a fixed amount and business and do not have unlimited liability. However, the general partners act as the usual partners and assume the responsibility of all debts and obligations of the money. Limited partners cannot draw back their money until and unless the dissolution of the business and they cannot take part in the management of the businesses as actively as the general partners can (Griffin, pp. 12-21, 2006). Quite a few design offices in the construction sector of United Kingdom are limited partnerships. Claremont group interiors and Morgan Lovell are the most common examples. Another type or organizations operating in the United Kingdom are Direct Labor Organizations (DLO). These organizations are famous for their repair, building, and maintenance services. They are contractors who offer these services on contract. Since they provide labor services, primarily that is why they have the name of direct labor organization. Moreover, there services are also worth using during an emergency or urgent basis. Drain cleaning, plastering, Brick lying, Emergency lighting, signage, gas fitting and plumbing are few of the functions that they perform. Lastly, a large number of housing associations exist in the United Kingdom that runs on not for profit basis. Their goal is provide needy people with shelter and at times, they end up giving shared houses to them. According to official statistics, there are more than 3965 housing associations in the United Kingdom responsible for the above-mentioned business. Examples include Hanover Housing Association, Anchor Trust, Servite Houses, Orbit Housing Association, Pavilion Housing Association, The Guinness Trust, Gower House, Housing 21, Accent South and many others. Like other trusts and not for profit organizations any excess profits or surplus income they invest it in financing, maintaining or acquitting new homes (Grier, Griffin & & Capper, pp. 3-9, 1998). References Grier, Nicholas, Griffin, Stephen, & Capper, David. (1998). UK company law. J. Wiley & Sons. Griffin, Stephen (2006). Company law: fundamental principles. Pearson Longman. Hicks, Andrew, & Goo, S. H. (2008). Cases and materials on company law. Oxford University Press. Murchie, Kay. (2009). UK construction sector contracts for 21st consecutive month. Retrieved on February 20, 2010. http://www.financemarkets.co.uk/2009/12/02/uk-construction-sector-contracts-for-21st-consecutive-month/ Organisation for Economic Co-operation and Development. (2002). Environmental performance reviews: United Kingdom, Volume 8. OECD publishing. Sealy, L., & Worthington, Sarah. (2007). Cases and Materials in Company Law. Oxford University Press. Read More