01/05/2017

Different types, size and scope of organisations and

their legal structures

Session 2 (LO1): Different types, size and scope of

organisations

Prepared by: Dr Gilbert Zvobgo

ICTM

By the end of the session, students should be able to

understand the different types of organisations (LO1):

Profit and not for profit and non-government

organisations (NGOs).

Small businesses - micro, small, medium-sized

enterprises (SMEs).

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Profit organisations

To be discussed in LO2

Non-profit organisations

What makes an organisation a non-profit has to do with

purpose, ownership, and public support.
These elements create:
A mission that focuses on activities that benefit society and
whose goal is not primarily for profit
public ownership where no person owns shares of the
corporation or interests in its property
income that must never be distributed to any owners but is
recycled back into the non-profit corporation's
public benefit mission and activities.

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Profit and Non-profit organisations

What makes an organisation a non-profit has to do with
purpose, ownership, and public support.
These elements create:
A mission that focuses on activities that benefit society and
whose goal is not primarily for profit
public ownership where no person owns shares of the
corporation or interests in its property
income that must never be distributed to any owners but is
recycled back into the non-profit corporation's
public benefit mission and activities.
In contrast, a for-profit business seeks to generate income for
its founders and employees. Profits can be shared with
owners, employees, and shareholders.

Characteristics of traditional non-profit organisations:

Purpose: To make a profit.

Ownership: Is owned by the public. It belongs to no private

person, and no one person controls the organisation

Control: Control of a non-profit lies with a governing board of

directors or trustees. The responsibility of that board is to see
that the organisation fulfils its purpose.

Accountability: Are accountable to the public and must file

annual information returns with the government - regarding its
finances.

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Not for profit and non-government organisations (NGOs).

Institutions that conduct their affairs for the purpose of
assisting other individuals, groups, or causes rather than
garnering profits for themselves.

Are tax-exempt businesses that benefit the good of the public.

Have no shareholders; do not distribute profits in a way that

benefits members, directors, or other individuals in their
private capacity.

Types of Not for profit : Charitable Organisations

These include a wide variety of institutions involved in
Poverty assistance (soup kitchens, counselling centres,
homeless shelters, etc.)
Religion (churches and their ancillary possessions, such as
cemeteries, radio stations, etc.);
Science (independent research institutions, universities);
health (hospitals, clinics, nursing homes, treatment centres)
Education (libraries, museums, schools, universities, and
other institutions)
Promotion of social welfare;
Preservation of natural resources

Promotion of theatre, music, and other fine arts.

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Types of Not for profit : Advocacy Organisations

These groups attempt to influence legislative process and/or

political process, or otherwise champion particular positions

May call themselves 'social welfare organisations' or perhaps

'political action committees.

Not all advocacy is lobbying and not all political activity is

political campaign activity. Some of this type of programme
can be accomplished through a charitable organisation, but
that outcome is rare where advocacy is the organisation's
primary undertaking.

Types of Not for profit : Social/Recreational Organisations

Examples: Country clubs, hobby and garden clubs, sports
tournament organisations all can qualify as non-profit
organisations, provided that they adhere to basic guidelines of
net earnings distribution, etc.

Unlike other tax-exempt organizations, however, their

investment income is taxable.

Satellite organisations:
Organisations are deliberately organised as auxiliaries or
subsidiaries of other organizations.
Examples: cooperatives, retirement and other employee
benefit funds.

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Benefits of non-profit organisations:

Success depends on its reputation in community

Customers can enhance or damage this reputation,

depending on level of satisfaction with service they receive.

Meeting and exceeding expectations of donors, volunteers

and clients ultimately results in increased donations of
financial and human resources to the agency.

Errors made by non-profit organisations:

Not listening to donor expectations
Unwarranted assumption of a donor's willingness to
contribute
Lack of follow-up after initial contact

Inadequate research on potential donors and their ability to

contribute Inability to close presentation with donor
commitment
Neglecting to establish rapport with potential donors prior to
solicitation
Neglecting to tailor solicitation to individual donors
Approaching potential donors without knowledge of how
donations impact them in the realms of tax deductions, etc.

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Definition of Terms
Small business
An independent business managed by its owner or
part owners and having a small market share either
by number of employees or turnover.
www.planningportal.gov.uk/england/government/en/1
115310689529.html

Small to medium-sized enterprise (SEM)

Statistical definitions of an SME use one or

more of three defining measurements:
number of employees;
turnover;
size of the balance sheet.

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Small to medium-sized enterprise (SEM)

Department of Business Enterprise and Regulatory

Reform:
Micro firm: 0-9 employees;

Small firm: 0-49 employees (includes micro);

Medium firm: 50-249 employees;

Large firm: over 250 employees.

EU (1996):
An enterprise which employees fewer than 250 persons and
which has an annual turnover not exceeding EUR 50
million,
and/or an annual balance sheet of not exceeding UER 43
million (Article Two)

Table 1: Revised European SME definition

Enterprise category Headcount Turnover ()
Micro <10 <2 million
Small >50 <10 million
Medium-sized <250 <50 million

Source: http://europa.eu/eur-lex/pri/en/oj/dat/2003/l_124/l_12420030520en00360041.pdf

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Reasons for SEMs revival in the UK

Growth of the service sector
Information technology
Flexible specialisation and networks
Subcontracting and fragmentation
Public sector re-organisation
Unemployment
The enterprise culture

The role of SEMs in the UK economy

Bolton Report (1971)
Productive outlet for enterprising and independent
individuals
Most efficient form of business organisation in some
industries
Specialist suppliers or subcontractors

Competition to monopolistic large companies

Innovators of new products/services and processes

Breeding ground for new industries
The seedbed for which tomorrows larger companies
will grow

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The role of SEMs in the UK economy

England
88% of all business enterprises in the UK are based
in England, with 33% concentrated in London and
the South East.
London, however, has the smallest SME base in the
UK, accounting for just 45% of employment.
The South West has the highest SME base in
England, accounting for just over 70% of
employment.
(Statistical Press Release URN 04/402, Office for
National Statistics, 2004)

Wales
Wales has the second highest SME base in the UK
(over 70%).
The majority (94%) of the estimated 170,000
business enterprises are micro enterprises,
employing 31% of all employees.
The majority of Welsh SME businesses are in the
services sector (including retail, hospitality, transport,
and financial and business services) and in the
construction industry.
(Size Analysis of Welsh Business SDR 69/2004, Office
for National Statistics, 2004; Statistical Press
Release URN 04/402, Office for National Statistics,
2004)

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Scotland
SMEs provide 53% of all jobs and make up 99% of
all business enterprises.
In 2004, the turnover of small and medium-sized
enterprises was over 70million.
The highest numbers of Scottish SMEs are engaged
in the financial and business services sector.
(Scottish Economic Statistics, Scottish Executive/ONS
IDBR, 2005)

Northern Ireland
Northern Ireland has the highest SME base in the
UK, accounting for nearly 80% of employment.
The majority of businesses enterprises are micros,
which account for 50% of all businesses.
Small businesses account for 9.5% of all businesses
and 9% of employment.

(Statistical Press Release URN 04/402, Office for

National Statistics, 2004)

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Advantages of Working for SEMs

Breadth of experience
Flexibility
Involvement
Control over career progression
Early responsibility
Identity and recognition
Fast turn-around
Speed of progression
Camaraderie (rewarding)

Disadvantages of Working for SEMs

Underemployment

Hidden jobs

Unstructured training
Challenge
Unstructured career route

Salary

Lack of protection - under UK law, SMEs < 22

employees do not have to recognise trade union
affiliations among their workers.

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References:
How Is a Non-profit Different From a For-Profit
Business?
https://www.thebalance.com/how-is-a-nonprofit-
different-from-for-profit-business-2502472

Non-Profit Organisation
http://www.authorstream.com/Presentation/majestic27
-593473-non-profitorganization/

http://www.checksure.biz/small_medium_enterprises.htm

http://www.dti.gov.uk/bbf/small-business/research-and-
statistics/statistics/page38563.html

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