Structure of Organization

Lecture 3 (a)

Instructor: Naveed Ahmad

 Structure of Organization
• Introduction
• Legal form of organization
• Companies
• Types of Organizations
• Management of an organization
 Organization
• Impossible to live in a civilized society without
close contact with many large organizations
• Likeschools,universities,publicutilities,
government and local government
departments, the Health Service, commercial
and industrial companies, and so on.
• In many ways, these organizations resemble
each other
How the organizations are Structured?

Legal forms of organization

Companies
– The constitution of a company
– Directors and the Company Secretary
– Disclosure requirements
– Corporate governance
Organizing an organization
…….
 Legal Form of An organization
• Fundamentally, the law recognizes
individuals—human beings who can be regarded
as responsible for their actions, in other words, all
human beings except those excluded by youth or
mental incapacity.
• Individuals can enter into contracts which can be
enforced by the courts; individuals can be tried for
crimes; individuals can be sued for damages;
individuals can give evidence; Acts of Parliament
can impose duties on individuals; and
• so on.
 Cont.
• For all but the smallest business organizations, it is
desirable that the organization should be given a legal
existence, through a process known as incorporation,
a word which means literally “making into a body,”
• An organization wishing to become incorporated in
this way must persuade the Privy Council that its
activities are in the public interest and agree a precise
statement of their scope and the organization’s
powers.
• Public bodies, such as District Health Authorities or
County Councils, are statutory bodies, that is, they are
established by Act of Parliament.
 Legal Form of An organization
• Law recognizes individuals
– Enter into contracts
– Tried for crimes
– Sued
– Act of Parliament impose duties on the individual etc.
• Incorporation
– Making into a body (Corpus)
– Organization should be given a legal existence,
through a process known as incorporation.
 Incorporated Organizations
• Incorporated
– Acts of Parliament – Ceredigion County Council

– Public or Private Companies (Companies Act 1985

and 1989)
Types of Commercial Organizations
1. Sole Trader

– Local Shop, Plumber

2. Partnership

– Doctors, Lawyers, Accountants

3. Limited Company

– Private or Public
 Sole Trader
• Individual
– Sole person responsible for all debts

– All assets including “private” at risk

– Does NOT have to be the only employee

 Sole trader
• Trading organizations are usually incorporated
as limited companies but there are two forms
of unincorporated trading organization.
• Sole trader is an individual who is operating
his or her own business. There are no legal
formalities attached to becoming a sole
trader; one becomes a sole trader simply by
starting to operate a business.
 Sole trader
• There are no legal formalities attached to
becoming a sole trader; one becomes a sole
trader simply by starting to operate a business.
• It may then be necessary to register with Customs
and Excise and to negotiate with the Inland
Revenue regarding one’s classification for income
tax purposes but neither of these is necessary
simply in order to become a sole trader.
 Partnership
• Two or More People
– All at Risk. Similar to sole trader but >1 person
• Normally professionals
– Doctors
– Lawyers
– Accountants
• Inflexible in Normal Commercial World
– Movement of key Personnel
– Too risky
 Partnership
• The Partnership Act 1890 defines a
partnership as “the relationship which subsists
between persons carrying on a business in
common with a view to profit”.
• When two or more people are carrying on
business together, the law will treat them as a
partnership, whether or not they have
concluded a formal partnership agreement.
 Partnership
• However, for most business purposes,
partnership has fallen out of favor.
• It is risky for the individuals involved because
they can be held personally liable for the
partnership’s debts, including any which may
result from one of the partner’s exceeding his
or her agreed authority in respect of the
partnership’s business; as with a sole trader,
 Companies
▪ Public or Private Companies
▪ Public –Public Limited Company (PLC)
▪ Trades shares to public
▪ Private – Company Limited (Co Ltd)
▪ Cannot sell shares to Public
▪ Can sell shares privately
▪ Limited by Shares
▪ Commercial Companies
▪ Limited by Guarantee
▪ Charities, Professional Bodies
▪ (Unlimited Companies)