For this chapter, you should be able to...

1. distinguish between THE PRIVATE AND THE PUBLIC SECTORS
2. outline the main features of FOR-PROFIT ORGANIZATIONS
3. outline the main features of FOR-PROFIT SOCIAL ENTERPRISES
4. outline the main features of NON-PROFIT SOCIAL ENTERPRISES

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1. PRIVATE VS PUBLIC SECTORS

Public sector = ran and owned by the state (e.g. electricity production, common in planned economices)
Private sector = ran and owned by individuals

2. TYPES OF FOR-PROFIT ORGANIZATIONS

1. Sole Traders = owned by only one person.

Advantage: 

• Setting up process is not expensive or time consuming
• All the profit is kept by one owner
• Complete control in owner

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Disadvantage:

• Unlimited liability and unincorporated
• Difficult to obtain business bank loans
• Difficult to raise funds

2. Partnerships = owned by 2~20 people

Advantage:

• ​​Setting up process is not expensive or time-consuming
• No need to publicly publish their accounts
• Each partner can specialize

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Disadvantage:

• Unlimited liability and unincorporated
• Profits have to be shared among more owners
• Every decision has to be agreed upon by all partners

3. Private Limited Company (Ltd.) = separate legal entities from their owners

Advantage:

• ​Limited liability and incorporated
• No limit on the number of owners
• Shares can be sold

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Disadvantage:

• Company's financial accounts are public
• No member has full control of the company
• Firms are not allowed to sell shares publicly

4. Public Limited Company (PLC) = often big, multinational companies with large number of employees

Advantage:

• Shares can be sold to the public
• Limited liability and incorporated
• Easier to raise loans from banks

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Disadvantage:

• Setting up business takes time and costly
• Financial accounts are public
• Risk that outsider can take control of the company

3. types of for-profit social enterprises

For-profit social organizations = run according to business principles but aim to make a profit. However, they do not only aim to maximize profits if doing so compromises their social purpose.

1. Cooperatives = a form of a partnership where the business is owned and run by all the members. (e.g. financial cooperative, housing cooperative, workers' cooperative ...) The priority of cooperatives is not to make profit, but to sell or offer its products or services at as close to cost price as possible.

2. Micro-financier = provides small amounts of finance to those who traditionally would not have access to it (for example low-income individuals) In many low-income economies, individuals with good ideas and a strong work ethic have been able to open their business through micro-finance.

3. Public-private partnerships (PPP) = a business created between a private sector business and the public sector. It typically involves the construction of a facility with a social aim.

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4. types of non-profit social organizations

Non-profit social organizations = run according to business principles but do not aim to make a profit. Their surpluses from trading may be shared with employees and customers, passed on to a third party and used to buy resources, raise finance, etc.
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1. Non-governmental organizations (NGOs) = common way to describe a variety of social enterprises that are not organized or run by any government.
2. Charities = aim to raise money for 'good' causes, and draw attention to the needs of disadvantaged groups of society
3. Pressure groups = circles of people that attempt to influence decision makers in politics, business and society