1. 805- Introduction to Management
Chapter 2:
Types of Organisations
page 12

2. Learning outcomes This chapter will enable you to:
Identify different types of organisation;
Recognise which types of organisation may be most appropriate in a given situation
Describe different ways of structuring organisations.

3. Profit or Non-Profit?
Profit-making organisations work largely to return a profit to shareholders. Profit ensures the (long-term) survival of the business:
e.g. sole traders, partnerships and companies.
Not-for-profit organisations work to gain societal good, and profit is less important:
e.g. incorporates societies, trust.

4. Legal Form
Organisations in New Zealand can take many different forms. These include:
Sole trader
Partnership
Corporation or company
Trust
Incorporates society

5. Features of a sole trader
One person owns the business.
They pay all costs
They receive all profits
The have unlimited liability
They can dissolve the business at any time.
See page 14 and page 15 Case Study: A cut above the rest

6. Features of a partnership
Two or more people own the business.
May contribute different skills or amounts of capital
Share the profits and losses (according to a pre-determined agreement.
Unlimited liability
Often professionals like doctors and lawyers are in partnerships because of legislative restrictions.
See page 15

7. Features of a company
A ‘separate legal entity’, distinct from the people who hold shares in it or who are employed by it.
Must be registered under the Companies Act 1993.
Limited liability
Has a Board of Directors and appointed managers.
See page 16

8. Features of a trust
Trustees manage the funds/business on behalf of trustees or beneficiaries.
Trustees are personally responsible for decisions made.
Family trusts are a common means of protecting assets and funds for future use by children in the advent of relationship or business failure.
See page 18

9. Features of a co-operatives
Comprised of groups of people of like-mined individuals who share their resources for the purposes of achieving a common business goal
Controlled by their members who have voting rights
Profits are shared proportional to the level of contribution. E.g. Fonterra suppliers get paid per kilogram of milk fat solid they supply to the co-operative.
See page 18

10. Features of a franchise
A unique form of business.
The franchisor ‘owns’ the name of the business, and the systems and processes.
The franchisee finances and manages the day-to-day running of the business, with the support of the franchisor.
A franchise agreement determines the details of the relationship.
See page 19 and Case study: Mowing makes money

11. Chapter summary
All organisations have a form, and this form will vary depending on the needs of the owners.
The public sector is run by the central or local government, while the private sector is run by individuals or organisations not related to the government.
There are four common forms of organisation in NZ, sole trader, partnership, company, or trust. Each has different legal requirements.

12. Chapter summary questions
What is the difference between a sole trader and a partnership?
Identify two profit-making organisations and two non-profit making organisations
Outline the main characteristics of a franchise
What does it mean if an organisation has limited liability?
How does a trust differ from an incorporated company?