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  Organisation of Business

Introduction to Organisation of Business

Almost all businesses that include more than a few owners and/or employees are set up as limited companies. The meaning of this is that the finance will come from the owners (shareholders) both in the type of a direct cash investment to buy shares (in the ownership of the business) and by the owners allowing past profits that belong to them, to be reinvested in the business. Finance will also originate from lenders (for instance banks), that earn interest on their loans and from suppliers of goods and services being ready to supply on credit along with payment taking place a month or so after the date of supply, generally on an interest-free basis.

In larger limited companies, the owners or shareholders are not included in the daily running of the business; in its place they appoint a board of directors to control the business on behalf of them. The board is charged with 3 main tasks:

  • setting the general direction and strategy for the business;
  • controlling and monitoring its activities; and
  • communicating with owners and another connected with the business.

Every board has a chairman that is elected by the directors that is responsible for running the board in a proficient manner. Additionally, each board contain a chief executive officer (CEO), or managing director that is responsible for running the business on an everyday basis. Sometimes, the roles of chairman and CEO are combined, even though it is generally referred to be a good thought to separate them in order to avoid a single individual containing excessive power. The board of directors demonstrates the most senior level of management. Under this level, managers are used, with each manager specified responsibility for a specific part of the business's operations.

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