Text a Basic Forms of Business Organisation

There are three main types of business ownership in the private sector of the economy: a joint stock company or limited company (AmE corporation), partnership and sole trader. The choice depends on what is to be produced, how capital is to be raised, and the size of the enterprise.

Sole trader (proprietorship). One person owns and runs the company. A single person provides the capital and takes all the risks. Since the proprietor is solely responsible for the success or failure of the business, he or she gets the profit and enjoys all the fruits of success. Likewise, a sole trader has unlimited liability for business debts, even if this means selling personal assets to meet creditors demands in the event of bankruptcy. The one-person business is the easiest to set up and to dissolve but it is usually good only for small business, e.g. in farming, retailing, repair work, personal services such as hairdressing.

Partnership. A group of people provide capital, set up the company and manage it together. Partners usually share both the risks and the profit of the enterprise. If the business fails, they are fully liable for all debts, and may even have to sell personal assets. A partner need not play an active role: there may also be sleeping partners who supply capital and share in the profits, but do not participate in the management of the company. They have limited liability, and in the event of bankruptcy only lose their investment, not their personal assets. Partnerships are a common form of business organization in such professions as law, accountancy or medicine.

Joint stock company or Limited company (Corporation Inc.). Most people doing business form limited companies. Basically, the joint stock company consists of an association of people who contribute towards a joint stock of capital for the purpose of carrying on business with a view to profit. A limited company is a legal person separated from its owners, and is only liable for the amount of invested capital. The capital is divided into shares, which are held by shareholders or stockholders. The liability of shareholders for debts of the firm is limited to the amount of money they had invested in the company to buy shares. Shareholders can vote at the annual general meeting to elect the Board of Directors.

There are two types of limited companies:

1. In a private limited company (Ltd), all shareholders must agree before any shares can be bought or sold. Most companies begin as private limited companies. They are often small firms consisting of the members of one family.

2. Public limited company (Plc) or Corporation is the most important form of business organization. Public companies are much larger units and can raise tremendous sums of money. A corporation is created by a legal document, called a charter, which is issued by the state. The basic distinction between a private and a public company is that a public company can offer its shares for sale to the general public on the stock exchange.

Some corporations are multinationals with subsidiaries and assets in different countries and they generally engage in mergers with other companies and acquisitions in order to expand. However, the large corporation is increasingly under threat from the growing number of dotcoms set up by entrepreneurs.

Since no one form of business organisation is perfect, so-called hybrids have been devised like: franchises, limited partnerships, cooperatives, and joint ventures.

Exercise 10 Answer the questions to the text.

1. What forms of business organisation are widely practised in the world/in this country? 2. Why do different types of business organisation exist? 3. What is the simplest and the oldest form of business enterprise? 4. What are the advantages and disadvantages of the one-person business? 5. What does limited/unlimited liability mean? 6. What are the most important differences between sole traders and corporations? 7. What are the alternative forms of business organization? 8. What is necessary to start a corporation? 9. What is the main difference between a Plc and a Ltd? 10. How can money be raised a) to start a sole trader, b) to start a public limited company? 11. How do shareholders participate in the operation of a corporation? 12. Why is the one-person business less important compared with the joint stock company?

Exercise 11 a) Put the types of business organisation into the correct box to complete the table.

1	2	3	4
one person provides all capital, sets up and runs the company	owned by two or more people who contribute capital	a registered company with restricted share transfer	a registered company whose shares can be bought and sold on the Stock Exchange
unlimited liability the personal assets of the owner(s) can be taken to pay any business debts		limited liability liability for business debts is limited to the amount of the capital subscribed

b) Make a report on the forms of business organization. Compare them in terms of their assets, forms of raising capital, liability, strengths and weaknesses, their role and place in economies. Support your story with your own examples.

Exercise 12 Make ten common business expressions with the words below, e.g. sleeping partner, annual general meeting. Use some words more than once. Make sentences with them.

annual ▪ company ▪ exchange ▪ meeting ▪ unlimited ▪ general ▪ debts liability ▪ partner ▪ business ▪ directors ▪ limited ▪ personal ▪ private sleeping ▪ sole ▪ stock ▪ trader ▪ board ▪ assets ▪ public ▪ of

Exercise 13 Passive Infinitives. Infinitives can be used to describe things or people. Fill in infinitives in these sentences, using their passive forms.

e.g. The letter to be signed is on the table. – Лист, що потрібно підписати, лежить на столі.

Mr Smith is the owner of the company to be formed in our town. – Містер Сміт – власник компанії, яка буде створена в нашому місті.

1 The new business (to start) will be in the form of a limited company. 2. The part of the goods’ price (to pay) to the government is called taxes. 3. The board of directors (to elect) by our firm includes experienced managers and a well-known market expert. 4. The number of shares (to sell) to public was decided on at the General Meeting of the stockholders. 5. The amount of capital (to raise) will soon be estimated. 6. The manager studied a draft of the Contract (to make) with the foreign company. 7. The corporation charter (to discuss) states the objective of the future business. 8. Our company’s representatives made a request about the goods (to produce) by the Manufacturer. 9. The different types of business organization (to find) in the UK may be classified under five headings.

Exercise 14 Write a short summary, explaining which company you would prefer to work for in the future. Give several reasons and counter-arguments. For example:

In a public limited company (corporation) you can …. Furthermore, big companies allow you to …, because of … . Consequently, you can … . On the other hand, it is true that if you work for a small company (sole proprietorship), you can … .Nevertheless, I prefer big companies because …, even though … can be a disadvantage.