Page 3 - Introduction
Page 4 - What is an organization?
Page 5 - Business Organization 1 - A Sole trader Page 6 - Business Organization 2 - Partnership
Page 8 - Business Organization 3 - Limited liability Partnership
Page 9 - Public vs. Private Sector
Page 11 - Conclusion References
This report sets out to establish and explain exactly what an organization is. I will provide Molly Mark and Mary with an explanation of 3 different types of business organizations and evaluate the pros and cons of each. Furthermore I will explain the differences between the public and private sector to give them an insight as to what sort of route they could take in their new business venture before concluding with my personal recommendation as to which organization is the most appropriate for Molly, Mark and Mary and their dental business.
What is an organization?
ACCA defines organizations as “social arrangements for the controlled performance of collective goals” (ACCA, 2012, Pg.2) BusinessDictionary.com (2014) further agree by stating that a social unit of people are structured and managed in order to meet their needs and pursue their collective goals. Oxford Dictionary are vaguer by simply saying an organization can be described as “a group of people with a particular purpose” (Oxford University, 2014). Although there are many definitions, they all come to the same point, that an organization is a group of people putting their thoughts and ideas together in order to create an intended output.
Different types of organizations
There are many different types of organizations all over the world (UWS, 2014). Although they all have common characteristics such as different people doing different things, a vast variety of objectives and goals and documented systems and procedures, these organizations will differ greatly from one to the next.
ACCA (2014) explain the key differences between organizations. These 6 key differences are ownership. There is a choice as to whether an organization will be public or private sector. Private sector companies are owned by individuals or shareholders whereas public sector companies are owned by the government. Another key difference is the company’s objectives. Every single organization will have a different set of goals they wish to achieve. Organizational activities will also vary due to this. How an organization sources their funding differs from one organization to the next. Private sector companies will be funded by the likes of owner or share capital, whereas public sector companies will be funded by central government (UWS, 2014). The range in sizes of organizations is also one of the key differences. Companies can range from micro to large organizations. The last key difference noted is an organizations liability. Depending on whether the company is trading as a sole trader, or limited company or even a partnership determines who will be liable should things go wrong.
Business Organization 1 – Sole Trader
One type of organization which may be considered is that of a sole trader. ACCA (2012) state that a sole trader is an “organization owned and run by one person”. Even though they are owned and run by one person, they are fully able to employ staff should they wish. This may be suitable for Molly, Mark and Mary due to them having unequal amounts of capital. Being a sole trader means the business does not have a separate legal identity for the owner meaning that they are held personally liable for the company’s debts. This is called “unlimited liability” (BBC, 2014).
The legal responsibilities of a sole trader are that you must keep records of your income and expenditure, you are responsible for bills relating to the business i.e. Stock and equipment. You are also held responsible for any losses that your company makes. Sole traders must complete a self-assessment tax return every year, pay income tax on any profits made and also pay