Part 2. Forms of business organization.

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Part 2. Forms of business organization.

Read and translate the text:

At the beginning of the 1980s there were many public corporations in the United Kingdom. They included British Coal, British Steel, the Post Office, British Telecom, the British Airports Authorities, British Rail and some others. They were nationalized mostly by Labour governments for political reasons, reflecting a desire to control and plan the economy in detail and in belief in the "rightness" of public ownership as an ideal. Some corporations became public to be rescued from bankruptcy. Thus the governments saved thousands of jobs in those firms, so the taxpayer was saved from paying out large sums to unemployed people. Very many public corporations later became private again. But some others are still publicly owned. In 1982 when British Coal was nationalized, all the mines went into public ownership. Then most mines were closed in the town as low-profit making. But some of the mines are still operating. To avoid a high rate of unemployment in such places now there has developed a lot of modern industry: HJ Heinz have been here for many years canning baked beans, soup and so on. Also there's an ICI factory, GKN the engineering group, and Nabisco making biscuits and breakfast cereals, and GUS, the Europe's largest mail order house.

Industry analysis provides the manager with summary descriptions of competition that are useful for strategic decision making. The manager attempts to define the relevant markets that the company is serving. Then, the manager attempts to characterize the extent of competition. New competitors arise in many ways. Start-ups and local competitors expand and become regional, national or global competitors. They also arise or change fundamentally as a consequence of innovation. Market definition is a difficult process that is closely related to defining the nature of the company's business. Most businesses in the United Kingdom operate in one of the following ways: sole proprietorship / trader, partnership, limited liability company, branch of a foreign company.

The sole proprietorship is the oldest form of business. There are many one-man owners, for example: a farmer, doctor, solicitor, estate agent, garage man, jobber, builder, hairdresser etc.

The partnership is a firm where there are a few partners. They are firms of solicitors, architects, auditors, management consultants etc. The names of all the partners of the firm are printed on the stationery of a partnership.

The most common type of company in the United Kingdom is the limited liability company. At the end of the name of such a company the word Ltd. is used. For example: Wilson and Son Ltd. Many of such companies are joint-stock companies owned by shareholders.

Limited liability companies are divided into public and private ones.Only public companies may offer shares to the public at the stock exchange. The names of such companies end in p.l.c. which stands for public limited company, for instance, ‘John and Michael p.l.c’. Private limited companies may not offer shares to the public. The names of such companies end simply in Ltd.

A branch of a foreign companyis a part of a company incorporated outside Great Britain but acting under the law of the UK. Usually these companies act in the UK under their normal foreign names. All partnerships and companies are regulated by the law of the UK or by Acts of Parliament, and are to be registered with the Registrar of companies. In order to be registered they are to deliver a few documents, namely: acertified copy of the company's charter, statute, memorandum and others. When a company is registered a certificate of incorporation is issued by the Registrar.

Businesses in the USA may be organized as one of the following forms: individual business, general partnership, limited partnership, corporation, alien corporation.

An individual business isowned by one person.

A general partnershiphas got several owners. They all are liable for debts and they share in the profits. Depending on the extent of commitment of the partners partnerships can take many forms. Companies can enter into informal strategic alliances, explicit long-term contract, or joint ventures. Informal purchasing agreements allow firms to form and dissolve partnerships quickly in response to changing market conditions. The partners avoid some of the costly negotiations required to form formal contracts and the potential costs of unwinding the agreement. Informal agreements have the disadvantage that the partners often need to renegotiate as market conditions vary. Informal agreements can be stepping-stones to longer-term relationships between companies.

Joint ventures are separate organizational units formed by two or more firms. The partners to a joint venture can be any types of firm, from small entrepreneurial businesses to multinational corporations. The joint venture can be directed at practically any business activity. What can make a joint venture an attractive alternative to full vertical integration is that the partners share the total costs of distribution, manufacturing, procurement, or other activities.

In a competitive environment, companies sometimes form large-scale alliances with protective partners. Companies form alliances to construct networks, sharing the costs of providing network services and assuring interconnection. Network alliances exist in telecommunications, Internet transmission, airlines, rail and trucking. Companies also form partnerships to negotiate and promote technology standards in such industries as computer hardware and software, product labeling, and broadcast communications.

Airlines create networks through strategic alliances – there are over 500 airline alliances in operation. For example, the Star Alliance includes United Airlines, Lufthansa, Scandinavian Airlines, Air Canada, Asett Australia, Air New Zealand, Thai Airways International, VARIG, and all Nippon Airways. Passengers benefit because they can put together a trip on multiple airlines with greater ease of making connections and take advantage of shared airline amenities such as lounges in airports for business travelers. The airlines benefit because they can feed passengers to each other's route, thus creating a global system. The Star Alliance advertises that it is ''the airline network for Earth" with over 210,000 employees and flights to 720 destinations in 110 countries.

A limited partnership has got at least one general owner and one or more other owners. They have only a limited investment and a limited liability.

A corporation is owned by persons, called stockholders. The stockholders usually have certificates showing the number of shares which they own. The stockholders elect a director or directors to operate the corporation. Most corporations are closed corporations, with only a few stockholders. Other corporations are owned by many stockholders who buy and sell their shares at will. Usually they have little interest in management of the corporations. Alien corporations are corporations of foreign countries.

All the corporations are to receive their charters from the state authorities. The charters state all the powers of the corporation. Many corporations try to receive their charters from the authorities of the State of Delaware, though they operate in other states. They prefer the State of Delaware because the laws are liberal there and the taxation is rather low. Such corporations, which receive their charters from an outside state, are called foreign corporations.All the corporations are required to get certificate to do business in the state where they prefer to operate.

There are several relationships that may grow up between business in Great Britain and the United States of America. No agreement has been reached among financial experts as to the precise difference in meaning between the terms. The most popular are takeovers and mergers.

In a takeover one company buys a controlling interest in another company by acquiring at least 51% of its shares. The company does this by making a direct approach to the company's shareholders for their shares. The company intending to take over will not necessarily consult the company it is taking over. The Stock Exchange Council in London has drawn up a code of practice to regulate takeovers to prevent some abuses. One such abuse is secret dealing when a company wishes to take over secretly and buys its shares secretly. Another abuse is insider dealing thanks to information used for personal profit.

With a merger, two or more companies involved will consult with each other previously. They try to make a certain agreement on their merger to the satisfaction of both companies.



relevant – directly connected with the subject; having practical value or importance

to trade – to buy or sell goods; to exchange

explicit – (of a statement, rule) clear, fully expressed; with full details

to avoid – to keep away from on purpose; the prevent from happening

to unwind – to come undone or undo

liability – smth. for which one is responsible by law

to incorporate – to make smth. larger, to include

abuse – bad or cruel treatment; wrong use

charter – a statement of principles, duties, and purposes of an organization


Exercise 1. Suggest the meaning of:

To be closely related to smth., the nature of company's business, global competitors, to renegotiate, partners' liability, solicitor, to offer shares to the public, builder, to be registered, a certificate of incorporation, corporation, at will, sole proprietor, public limited company, private limited company.

Exercise 2. Find the English equivalents for:

Анализ промышленности, следствие инноваций, товарищество, акционерное общество, затраты на заключение нового договора, быть основой (краеугольным камнем), общество с ограниченной ответственностью, совместное предприятие, временный союз, парикмахер, регистрация (оформление), учредительный документ, управлять корпорацией, корпорация закрытого типа, иностранные корпорации, власти штата (амер), поглощать, сливаться, благоприятные условия (удобства).


Exercise 3. Translate the word-combinations into Russian and give your own examples:


    of incorporation
birth certificate goods
health certificated doctors


    joint stock company


certified copy ______________ fees ______________________

company's charters __________ deep stamps ________________

statute(s) __________________ stamp duty on capital _________

memorandum ______________


Exercise 4. Translate into English:

1. Существуют три основные формы бизнеса – единоличная собственность, партнёрство и корпорация. В США на единоличную собственность приходится более 3/4 всех предприятий, в то время как доходы её составляют менее 1/10 от всех полученных. Корпорации составляют менее 1/5 общего числа и получают 9/10 всех доходов.

2. Кооператив – это предприятие, которым владеют и которое контролируют его члены, обычно потребители или поставщики, но иногда и сами рабочие. Члены кооператива также как и в корпорации несут ограниченную ответственность в делах предприятия, но в отличие от корпорации, каждый член кооператива имеет только один голос, а доход распределяется в соответствии с той долей продаж или поставок, которую сумел осуществить каждый член кооператива, например, за год. По сравнению с корпорацией кооператив имеет налоговые преимущества и меньшее вмешательство в свои дела со стороны правительства.

3. Дочерняя компания (subsidiary) – это корпорация, контролируемая другой корпорацией, которая владеет таким пакетом акций первой, что имеет право назначать руководящий состав в дочерней корпорации. Дочерняя корпорация является одной из форм роста корпорации, наряду с внутренним ростом (internal growth), слияниями, экспансией за границу (expansion overseas), хотя в большинстве случаев скупка активов для расширения корпорации на рынке попадает под действие антитрестовских законов.

4. Корпорации должны получить регистрационные документы от властей штата, а также сертификат (свидетельство) в том штате, где они хотят функционировать. Многие крупные конкуренты на мировом уровне объединяются в альянсы, что даёт им возможность осуществлять большие бизнес проекты и лучше удовлетворять запросы потребителя.


Exercise 5. Study the features of the basic forms of business organization and fill in the table:

  Sole proprietorship Partnership Corporation
The level of complication      
Duration of business      

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