Sometimes citizens of a community and clients of nonprofits

Sometimes citizens of a community and clients of nonprofits will become confused as to the differences between public, private for-profit, and private nonprofit organizations. Provide a clear, succinct definitions of each type of organization with a supporting citation for each. Also provide five examples of each type of organization.

Solution

Public Organization

In public organization which also called as state-owned organizations are owned by the government. They cannot raise capital through public. They do not have any shareholder. Such company is controlled by board of director appointed by the government. All profit is shared with the state and not distributed among the employee or public. Public enterprises capital provided by taxation, rate assessment, sloughing back, borrowing, etc. Their aim is not to make profit but to work in the public interest. Public enterprises are used to influence the economy. Since size of such organizations are huge it is difficult to manage such enterprises.

Example –

Private Organization

Private organization is not listed on stock exchange as they do not raise capital through public. They invest their own capital and utilized their own skill for the organization. They mostly raise capital through angel investors who in terns expect some share of profit and share in the decision making. Owner of private organization tend to hold majority share in the organization and aim at pure profit making. Shareholders can not sell stock to the general public. They have to offer share to the other shareholder first.

Liability of owner restricted to the share they own in the company. So in the event of distress they can pay off share they own in the company and do not have to touch their personal asset for the company. Such companies are known as Pvt Ltd company

Later such companies can raise fund through stock exchange which means raising capital through distributing stock for public. Such companies are known as Public ltd company. Such companies can distribute profit in terms of dividends to the shareholder.

Example –

Private nonprofit organizations

Nonprofit organization used its revenue for betterment of society rather than distributing to its stakeholder, owner or any member. It is tax exempt organization. It works in the religious, educational, scientific and research domain. These organization return money back to the organization to invest in the cause. Nonprofit organization volunteer and employee do not receive extra money apart from their minimum salary for their fund-raising activity. In most case money to pay the staff comes from the state. Still non-profit organization have to operate like business entity which is professional and financial responsible but keep focus on charitable work which is not for profit motive.

Example –