Organisational Principles: ownership, management and control
The Organisational Principles profile appears in all three papers: multiple-choice items, structured short answers and the School-Based Assessment. It tests how a business is owned, structured, directed and staffed, and it rewards comparison rather than description - most questions ask why one form, structure or leadership style suits a named situation better than another.
Choosing a form of business organisation
- Sole trader: one owner, unlimited liability, no separate legal personality, cheap and quick to start, business ends when the owner dies or retires.
- Partnership: usually 2–20 persons; a partnership deed sets out capital, profit sharing and dissolution; liability is unlimited unless it is a limited partnership; the firm ends when a partner leaves or dies.
- Private limited company: separate legal personality, limited liability, shares sold privately, must file annual returns, perpetual succession.
- Public limited company: shares traded on a stock exchange, accounts published, vulnerable to takeover.
- Cooperative: owned and controlled by members on a one-member-one-vote basis; surplus returned as dividend or patronage refund.
- Public corporation: created by statute, owned by government, financed mainly from public funds, expected to provide essential services rather than maximise profit.
Management and structure
- Functions: planning, organising, staffing, directing and controlling, with coordinating running through all of them.
- Autocratic leaders decide alone; democratic leaders consult; laissez-faire leaders set objectives and leave the group to execute.
- Chain of command is the line of authority; span of control is the number of subordinates one manager supervises directly.
- Delegation passes authority for a task, but the delegator keeps accountability; abandoning the outcome afterwards is abdication, not delegation.
Worked example
Two nurses with equal savings want to open a pharmacy. A partnership doubles the capital and combines complementary skills, and a deed can fix profit shares quickly and cheaply. But ordinary partners carry unlimited liability, so a dispensing error could reach their homes and cars. If they expect a third investor within a year and want protection, a private limited company delivers limited liability and perpetual succession at the cost of registration, filing and disclosure. Recommendation: incorporate, or trade as a partnership only with adequate professional indemnity cover.
Traps that cost marks
- Writing "limited liability" when you mean "limited company".
- Confusing a public corporation with a public limited company.
- Claiming a partnership has a separate legal personality.
- Treating delegation as a transfer of responsibility.
- Listing management functions without applying them to the case.