Unit 4 Business Organizations (Businesses)

Business organizations are the basic economic institutions in different economic systems. They determine much of how the economy operates. Businesses produce goods and services and they might be small firms with just one owner or very large with thousands of shareholders “owing” the firm. In many countries there are nationalized companies belonging to the state, as well as private companies.

There are various types of business organizations, which operate in the private sector. The simplest form is an individual proprietorship run by a sole trader: for example, a shop, a taxi, a restaurant owned by a single person who is entirely responsible for all the business affairs. This type of organization has certain advantages and disadvantages. Sole trader doesn’t have to consult anyone else when making decisions, the profits don’t have to be shared with anyone else, it is easy to organize such business. All these things explain why so many people start firms and try to run them alone. But a sole trader sometimes faces difficult problems. One person has limited resources to start and operate a business and he has to bear 100% of the risks of his company.

A sole trader must deal with the problem of unlimited liability. According to the law, the owner and the business are one and the same. If the business goes bankrupt, the owner must pay all the debts. The personal property such as a home or a car can be taken. No limit is placed on the amount the owner can lose. High profits can make him wealthy, but high losses can ruin both his company and his personal property.

If two or more individuals wish to go into business together they can form a partnership.

Partners generally contribute equal capital, have equal authority in management, and share profits or losses. In many countries doctors, lawyers and accountants are not allowed to form companies, but only partnerships with unlimited liability – which should make them act responsibly as in the case of bankruptcy, a partner with a personal fortune can lose it all.

Often one person doesn’t have enough money to start a large business, so combining the resources of a number of people and forming a corporation is a way to raise the large amount of money. In Britain, most of smaller enterprises are private limited companies (Ltd.), which cannot offer shares to the public. Their owners can only raise capital from friends or from banks.

A corporation is a business that has the rights and duties of an individual. It can buy, sell and own property, make contracts, hire and fire workers, set prices and be sued and taxed.

A successful growing British business can apply to the Stock Exchange to become a public limited company (plc); if accepted it can publish a prospectus and offer its shares for sale on the open stock market.

And, as we know, firms in the public sector are owned by the government, for example the post office or the railway.

determine (v) – определять, устанавливать

owner (n) - собственник

to own (v) – обладать, иметь в собственности

shareholder (n) - акционер