1.2. Types of Organizations
- Private vs. Public sectors
- Private Sector
- Goal is to make profit
- Owned, financed and run by private individuals or entities
- Public Sector
- Goods and services provided by the government or local authority
- May be free or sometimes with a small fee
- e.g. public hospitals, museums, etc.
- Types of for-profit/commercial organizations
- Sole trader
- Business that is completely owned and controlled by just one person
- Simplest form of business
- Owned by a single person who assumes all profits and liabilities
- Advantages
- Little legal requirements for setup
- All the income goes to one man
- Less restrictions and easy decision-making
- Disadvantages
- All the income tax is shouldered by one man
- Unlimited liability (owner is the same legal entity as the business) and all the debt incurred by the business is put on the owner
- Partnership
- Company ran by two or more individuals who form a partnership
- Each person contributes money and resources, as well as sharing the responsibilities of managing a business.
- Turns into a corporation if there >15 partners and will pay corporate tax.
- Has a deed of partnership stating the responsibility of each partner
- Involves presence of “silent” or “sleeping” partners, who do not make decisions, merely giving money to the business and earning profit
- Advantages
- Liability is spread around
- Range of skills
- Higher capital
- Disadvantages
- Unlimited liability despite being spread out between partners
- Slower decision-making
- Private limited company (LTD)
- Shareholders are limited to family, friends, business partners
- Shares cannot be sold to the public
- Type of incorporation
- Owner and company are separate entities
- Results in limited liability
- Registered at the Securities and Exchange Commision (SEC)
- Advantages
- Limited liability – when the company is sued or incurs losses, all a shareholder will lose is his stock in the business.
- Higher capital, higher capacity for expansion
- Disadvantages
- More restrictions
- Corporate taxes (higher)
- Public limited company (PLC)
- Company whose shares are listed on a stock exchange and can be freely bought and sold by anyone
- Required by law to publish their complete and true financial position
- Type of incorporation
- Must conduct shareholders’ meetings
- An LTD can convert to PLC by offering stock market flotation or an initial public offering (IPO)
- Advantages
- More capital raised from selling stock
- Limited liability
- Continuity after death, freely transferable
- Higher capacity for expansion
- Disadvantages
- Possibility of a hostile take-over through shares, control can change unexpectedly and be lost by the original owner
- Much more restrictions
- Corporate tax
- Types of for-profit social enterprises
- Cooperatives
- Organizations that are jointly owned and run by its members who share in profits and benefits
- Advantages
- Shareholders must be help run organization, work is more spread out
- Equal voting rights/power among all shareholders
- Disadvantages
- Decision-making may be more time consuming or involve more conflicts
- Less profit for each shareholder as it is spread among many members
- Microfinance providers
- Microfinance – loan service offered to individuals or groups with no access to more conventional banking services (unemployed, low-income individuals, etc.)
- Public-Private Partnerships (PPP)
- Public corporations are sold-off or transferred to the private sector
- Advantages
- Incentivized to be more efficient and productive
- Government can focus on other projects and infrastructure
- Enjoy the skills and talents of the private sector (can lead to increased efficiency and productivity)
- Disadvantages
- Services provided would be more expensive
- Prices goes up, government has to subsidize (increase in taxes)
- Aim of profit may lead to cost cutting, lower quality, higher prices
- Types of non-profit social enterprises
- Non-profit businesses
- Run not for profit but to benefit the public (especially the marginalized)
- Operational (objective or purpose) or advocacy (promote or defend a cause)
- Non-profit organizations (NPOs) vs. non-government organizations (NGOs)
- NPOs
- Does not divide its funds between owners
- Aim is to raise funds and use it for their beneficiaries
- e.g. service organizations or charities, Bantay Bata, PGH, PCSO
- NGOs
- Exists in the private sector
- NGOs participate in humanitarian projects, education projects, etc.
- e.g. WWF, UNESCO, Red Cross
- Charities
- A non-profit organization that is exempt from taxes
- Deploys its resources for charitable purposes
- May raise funds to reduce poverty or to reduce environmental problems.
- e.g. Caritas Manila, Pondo ng Pinoy
- Pressure Groups
- Organized groups that do not run for election
- Advocate certain interests such as environment, sexuality, religion, rights, etc.
- Seeks to manipulate the public or private sector for certain causes.
- e.g. PETA, Greenpeace, Church, LGBT