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Types, Sizes, and Scope of Organizations

Added on - 20 Jul 2022

This document explains the different types, sizes, and scopes of organizations. It discusses the difference between For-Profit, Not-For-Profit, and Non-Government Organizations (NGOs). It also explains the range of legal structures associated with different forms of business: sole traders, partnerships, and private limited companies. 

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LO1: Explain the different types, size and scope of organizations
P1: Explain different types and purposes of organizations; public, private and
voluntary sectors and legal structure
P 1.1: Explain different types of organizations: Differences between for-profit
and not-for-profit and non-government organizations (NGOs)
Senior & Swailes (2010, p.4) defined organization as “organization can be
seen as people interacting in some kind of structured or organized way to
achievesomedefinedpurposeorgoals”.Organizationis“asocial
arrangement for achieving controlled performance in pursuit of collective
goals”[CITATION And07 \p 6 \l 1033 ].According to Worthington & Britton
(2015), organizations are groups of people who are with the same purposes
and working together to reach the desired goal.Veluri (2010) explained that
an organization is a framework of people who have the relationships for the
realization of goals. Organization is a formal structure that is created by
managementtobuildrelationshipsbetweenpeopleandtoreachthe
common goal[ CITATION Lau07 \l 1033 ]. Therefore, an organization is a
group of people working under constructed systems to reach the common
aims and goals.
Defined In this way, organization has three generic sectors and they are
private, public and voluntary sectors[ CITATION Ian15 \l 1033 ]. Worthington &
Britton (2015) explained that public sector organization is an organization in
the state sector of the economy does profits those loans and the part of the
economy under the control of the government and its agencies, where the
state establishes that runs off the organization[ CITATION Wor15 \l 2057 ],
organizationset upbygovernmentiscalledPublicSector.Theyaimfor
public services which are funded by taxes. Organizations are not part of
publicsectors[CITATIONKap19\l2057].PrivateSectorareusually
organizations run privately or a group of individuals to maximize their profits
andmarketsharesincome.Aprivatecompanydoesnottradeoff their
market share unlike public business because they want to limit or restrict
their ownership. So, the main objectives of private sector business are profit
maximization for their business, increase market shares in their respective
industry, to grow faster, increase sale revenues and customer satisfaction.
Private sectors are organization not owned or operated by government. But
sometimesprivatesectorsandpublicsectorscooperatetoprovidethe
society together with a program or company. This type of partnership is
called public-private partnership[ CITATION Kap19 \l 2057 ]. The private sector
is the part of an economy where the business is owned and controlled by the
private sector that is the part of the economy where ownership and control
of the organization are in the hands of private individuals or groups and
where profit-seeking is a central- goal[ CITATION Wor15 \l 2057 ],are usually
organizations run privately or a group of individuals to maximize their profits
and market shares income. The voluntary sector is the part of the economy
where the economic activity that is carried out by not-for-profit and non-
governmental organizations such as charities, voluntary bodies is comprising
thoseorganizations,includingcharities,voluntarybodiesandcommunity
businessesthatarenot-for-profitsenterprisesandnon-
governmental[ CITATION Wor15 \l 2057 ], they are a group of people who has
the same has the same interest about a particular business[ CITATION Wor \l
2057 ].
Organizations are not the same as they have different types of purposes.
According to these purposes, there are three main types, namely, for-profit
organizations, not-for-profit organizations and non-government organizations
(NGOs). For-profit organizations aim mainly to generate profits. Not-For-Profit
organizationstargetsonlyforpeoplewiththeirproblemsotherthan
generatingprofitsandalsoNGOsaretheorganizationsthatarenot
concerned with the government but these organizations offer services to
help people.
According to Mullins (2010), for-profit organizations are groups of people
which are related to business and organized to earn profits.Not-for-profit
organization is a compound of people organized for community of citizens
other than generating profits[ CITATION Cor19 \l 1033 ]. The income for the
organization is not distributed to its members such as directors, officers etc.
These organizations are organized under state laws of the country[CITATION
Cor19 \l 1033 ].Non-Government Organizations (NGOs) are the not-for-profit
private organizations which are organized on local, national or international
stage to support the citizens and these organizations are not controlled by
the government[CITATION Kal97 \l 1033 ].
Thedifferencesbetweenthesethreetypesoforganizationsarebeing
explained in Table 1.
Table1:Comparisonbetweenfor-profitorganization,not-for-profit
organization & Non-Government organizations (NGOs)
Source: Prepared based on Norwich University (2016); Worthington & Britton
(2015)
Inconclusion,accordingtothetable,therearedifferenttypesof
organizationsandthesedifferenttypesoforganizationshavedifferent
elementssuchaspurposes,productsandservices,financialsources,
audiences, employees and ownerships.
P 1.2: Explain the range of legal structures associated with different forms of
business: sole traders, partnerships and private limited companies.
Organizations exist in many types according to their different features such
as type of purposes, ownership etc. Among these organizations, business is a
type of for-profit organization i.e. business organizations aim to get profits.
“Business is the organized effort of individuals to produce and sell, for a
profit, the goods and services that satisfy society`s needs”[CITATION Wil09 \
p 9 \l 1033 ]. Maheshwari (2003, p. 1) elucidated business as “an activity, in
whichdifferentpersonsexchangesomethingofvaluewhethergoodsor
servicesfornaturalgainorprofit”.Vēṇugōpāl(2006,p.2)definedthat
“businessreferstoalltheactivitiesconcernswithproduction,
manufacturing, lending, selling, leasing to get profit”. Hence business is a
kindoforganizationwherepeopleareworkingsystematicallytogetthe
desire goals and profits.
According to the above definitions, it is clear that business is a type of for-
profit organization. And so there can also many other organizations due to
their differences. The first one is about the Legal Form. Legal Forms are
different according to how the organizations are constructed. Legal Form can
be explained in terms of limited and unlimited liability.
Limitedliabilityisakindoffundamentalprinciplewhichmeansina
company, if some problems happened and these caused the company to go
bankrupt, these shareholders will lose the value of shares but the case will
end with these values and it will not continue for the shareholders` other
personal assets[CITATION Cor19 \l 1033 ]. Due to above definition, limited
liability is a typef legal form which is safe for shareholders and owners of a
companyasthistypeoflegalstructurewillnotharmtotheowners`
respective possessions.
According to Worthington & Britton (2015), unlimited liability means that if
thebusinessisestablishedbyonlyonepersonoritisestablishedwith
partners, both individual owner and partner have full responsibility for what
happen within the business. For example, if the business loss in law suit or
hassomedepts,theownerhastosolvethisandifthefinancialisnot
enough, the owner has to sell his or her personal assets. Depending on the
above meaning, it can say as unlimited liability is a kind of dangerous legal
form as the owner of the business that owns this type of legal form can have
many threats and so creative ideas will not come out as expect.
Accordingtotheselegalforms,organizationsaredifferentiatedtothree
types such as sole trader, partnership and limited company (private and
public). Among these, sole trader and partnership type of organizations have
the legal form of unlimited liability and limited companies have the legal
form of limited liability. A sole proprietorship is a simple business that is run
only by the owner so it has no legal distinction between the owner and the
business.Itisnotalegalentity.Thesoletraderisaneasytosetup
organization due to the owner being the only employee so the business is
highly flexible and can make decision by themselves. When a business is
only operating and run by single person the owner receives the all the profits
from the business. Sometimes the proprietor faces disadvantages by having
limited resources due to the proprietor being only the person in the business.
They can face lack of new or innovated ideas and have unlimited liability.
Thebusinessmaypauseorfacedifficultiesduetotheownership.
Restaurants, hairdressers, plumbers and electricians are examples of sole
proprietorship[ CITATION Wor \l 2057 ].
The termpartnership, is used to mean a business structure where intwo
ormoreindividuals,cometogetherforundertakingalawful
businessand have agreed toshare the profits and lossesarising from it.
Themanagementandoperationofthebusinessshouldbeperformed
eitherbyallthepartnersoranyofthem,actingforallthe
partners[CITATION Bus193 \l 2057 ],the partnership is the relation which
subsists between persons carrying on a business in common to profit, like
the sole trader, this form of business organization does not have its distinct
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In conclusion, organizations are different as their features are not the same. These organizations can be differentiated by many methods. Mainly with the legal form. But also with the size of that business. These sizes can be different as there are many countries in the world and each country has its own types of SMEs.