Understanding the organisational purposes of a business
Unit 1 Assignment: Business Environment
Understanding the organisational purposes of businesses.
A number of business organisations exist in society today ranging from small, sole traders to large multinational organisations and although they share the common goal of generating profit, their purposes and objectives differ.
Organisations take on a number of different and can be placed in to three main categories – private sector, public sector, and voluntary sector.
Private sector organisations are established primarily to make money. The smallest organisation in the private sector is the sole trader. Sole traders are business run by an individual. Business and personal assets are not distinguished for sole traders so should the business incur a loss the owner is liable and may have to pay any debts using their personal funds and assets. Sole traders are the most popular type of organisation in the UK; it is easy to organise requires only small amounts of finance. It allows the owner flexibility as they are in charge of the business which enables them to adapt easily to any changes in the market. The owners are often very close to their customers. The owner keeps any profit made. There are disadvantages to being a sole trader; the owner of the company is personally liable for any losses. They may have difficulty raising funds and securing bank loans due to their small assets which makes expansion difficult. Sole traders have difficulty finding cover if they are sick and there is no-one to continue the business in the event of death.
Another organisation within the private sector is a Partnership. A Partnership is 2 or more people forming a business. Like sole traders the partners are personally liable for any financial losses. Partnerships are often established to combine skills and resources which allow businesses to grow. Limited Liability Partnerships also exist – this means the partnership has a separate legal entity therefore the business is
liable for any losses. The partners themselves are not personally liable. Limited Liability Partnerships are often businesses such as accountancy firms and solicitors.
Another form of organisation is a Company. Companies are organisations which have a defined legal entity which means the company is liable for any losses – shareholders are not personally liable. Companies can be public or private. Public limited companies (Plc) trade on the official stockmarket. Shares for private limited companies can only be bought from the shareholder. Legal procedures must be followed in order to create a company. The shareholders must employ directors to run the company and the company must be registered with Companies House.
Public sector organisations are owned by the government and includes services such as the NHS, Education, the Police, and the Army. They are funded by the government through taxes and are answerable to the treasury. Public sector organisations are created to provide a service for the community rather than purely to make money. For example, a school’s objective may be to produce good students whose knowledge will benefit society, the NHS may want to train doctors, and the job centre seeks to reduce unemployment. Their mission statement is “The Department for Work and Pensions exists to promote opportunity and independence for all. We provide help to individuals and support the country’s economic growth and social cohesion”.
Organisations within the voluntary sector have social goals over economic goals, such as charities. T A charity is a non-profit organisation and its goals are to serve the public interest. They can take on a number of legal structures; unincorporated, charitable trust, company limited by guarantee, or a Charitable Incorporated Organisation. Other organisations within the voluntary sector are housing associations, which aim to provide social housing. The key factor in any voluntary organisation is that the people who run the company do not make their living from it.
Understanding the organisational purposes of businesses.
A number of business organisations exist in society today ranging from small, sole traders to large multinational organisations and although they share the common goal of generating profit, their purposes and objectives differ.
Organisations take on a number of different and can be placed in to three main categories – private sector, public sector, and voluntary sector.
Private sector organisations are established primarily to make money. The smallest organisation in the private sector is the sole trader. Sole traders are business run by an individual. Business and personal assets are not distinguished for sole traders so should the business incur a loss the owner is liable and may have to pay any debts using their personal funds and assets. Sole traders are the most popular type of organisation in the UK; it is easy to organise requires only small amounts of finance. It allows the owner flexibility as they are in charge of the business which enables them to adapt easily to any changes in the market. The owners are often very close to their customers. The owner keeps any profit made. There are disadvantages to being a sole trader; the owner of the company is personally liable for any losses. They may have difficulty raising funds and securing bank loans due to their small assets which makes expansion difficult. Sole traders have difficulty finding cover if they are sick and there is no-one to continue the business in the event of death.
Another organisation within the private sector is a Partnership. A Partnership is 2 or more people forming a business. Like sole traders the partners are personally liable for any financial losses. Partnerships are often established to combine skills and resources which allow businesses to grow. Limited Liability Partnerships also exist – this means the partnership has a separate legal entity therefore the business is
liable for any losses. The partners themselves are not personally liable. Limited Liability Partnerships are often businesses such as accountancy firms and solicitors.
Another form of organisation is a Company. Companies are organisations which have a defined legal entity which means the company is liable for any losses – shareholders are not personally liable. Companies can be public or private. Public limited companies (Plc) trade on the official stockmarket. Shares for private limited companies can only be bought from the shareholder. Legal procedures must be followed in order to create a company. The shareholders must employ directors to run the company and the company must be registered with Companies House.
Public sector organisations are owned by the government and includes services such as the NHS, Education, the Police, and the Army. They are funded by the government through taxes and are answerable to the treasury. Public sector organisations are created to provide a service for the community rather than purely to make money. For example, a school’s objective may be to produce good students whose knowledge will benefit society, the NHS may want to train doctors, and the job centre seeks to reduce unemployment. Their mission statement is “The Department for Work and Pensions exists to promote opportunity and independence for all. We provide help to individuals and support the country’s economic growth and social cohesion”.
Organisations within the voluntary sector have social goals over economic goals, such as charities. T A charity is a non-profit organisation and its goals are to serve the public interest. They can take on a number of legal structures; unincorporated, charitable trust, company limited by guarantee, or a Charitable Incorporated Organisation. Other organisations within the voluntary sector are housing associations, which aim to provide social housing. The key factor in any voluntary organisation is that the people who run the company do not make their living from it.