Building societies and other types of organisation
A Building Societies Association case study

Page 1: Introduction

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Building societies date back to the late eighteenth century. The first known building society was set up in 1775. This was to enable people to pool savings together and to build their own homes. However, once they had built their houses, this particular society closed. In the 1840s, societies began to accept savings from members who were not necessarily potential home owners. It was then that...
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Page 2: Types of organisation

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There are several different types of organisation: The simplest way to start up a business is to be a sole trader. One person provides the funds, makes the decisions and keeps any profit. The owner is also the boss and controls the business. The main disadvantage is that the owner is also totally responsible for any debts and has unlimited liability for these debts. An alternative is to form a...
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Page 3: Benefits of mutual organisations

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A building society is a mutual organisation. This means that instead of having shareholders, it has members who collectively own the business and are also its customers. The main examples of this type of organisation in the UK are co-operative societies, mutual insurance companies and building societies. Members have the right to vote for directors regardless of how much or how little money they...
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Page 4: Shareholders and stakeholders

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Shareholders The shareholders in a plc own shares which pay dividends; shareholders are able to vote on major company decisions. Shareholders may include customers, employees, other businesses and the wider public. Stakeholders A business' stakeholders include anyone with an interest in the company and its activities, financial or otherwise.  Banks set their strategy to maximise...
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Page 5: Raising finance

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Every business needs finance: As a plc, a bank raises part of its long-term capital from selling shares. It rewards shareholders with dividends. Funds also come from savers who are not usually shareholders. As a mutual, a building society”s owners and customers (members) are the same. Savers provide the society's long-term capital and its main source of funding for its mortgage...
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Page 6: Conclusion

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There are different types of organisations, from sole trader to plc. Each has different levels of liability, risk and benefits. Banks are typical plc organisations, which source funds from shares and pay dividends to shareholders.  Building societies are mutual organisations. Their members are both owners and customers. They compete with banks for their share of the market in savings...
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