TOPIC

FORMS OF BUSINESS ORGANISATIONS

Objectives
At the end of the lecture, the trainees should be able to;
List and explain the types of business organization we
have?
Explain the major role of sole proprietor?
Appreciate the ownership structure prefer?
Introduction
The ownership structure of an enterprise could be in many
forms. It could be in a form that would be controlled and
owned by an individual, who is referred to as sole proprietor
or one man business. It could also take the form of
partnership which could have a minimum of two partners. It
can also be in form of a limited company, which could either
be public or private ownership.
 Whatever category an entrepreneur belongs to, there are
some rules, laws and company acts that determine the
structure of formation of each business ownership.
An entrepreneur must decide in the beginning about the
type of ownership. He may consult family members,
mentors and some executives or consultants to arrive at a
decision on this. The decision also depends on the product,
volume, market and scope in future. Each type got its
merits and limitations.
Sole proprietorship
In this category, the title of assets, liabilities are in a
single persons name. It could be any type of business of
production or services. The owner exercise the rights and
privileges in decision making. These are normally tiny
industries, provision stores, repairers, service or trading
firms where an individual can manage all management
activities himself. However, he can take assistant of
workers and staff for getting work done for the firm. He
controls the business and take responsibility for profit or
loss.
Merits of sole proprietor
 start in small way with less capital
Organization is small and simple
Fast and effective decision making
Sincerity and hard work
Less paper work and formalities
Suitable for small workshops, repairs center's, provision
stores, canteens etc.
Demerits
 loss in the business, the owner is likely to shift to other
activities.
No proper account maintained
Job satisfaction depends on the owners knowledge and
attitude.
In spite of limitations and inconveniences, this form of
business organization occupies prominent place in the
business world.
PARTNERSHIP
Partnership is business set up to make profit, own by
more than one person. Normally, two to four people form a
good team and divide the responsibilities like, production,
finance, marketing purchase etc. so that each person is
kept busy and function.
Partnership may be defined as the relationship between
persons who have agreed to share the profits of the
business carried on by all or any of them for all.
 In partnership firms, it is assumed that all the partners
would have mutual trust and respect. The accounts and
dealings would be opened and no hide and seek. Opinions
and views of partners will be accommodated as far as
possible.
Merits
 pooling of funds would be easier
Variety of talents and skills will be available
Formation of company is easy and there is legal binding
to share profits and loss
Income tax burden will be distributed on partners
Demerits
 Management of firm is difficult if more than one person
handles a division or responsibility
Different opinion and mistrust is likely to hamper work and
progress of the firm
If the main partner is sick, injured or disinterested, it
affects the organizations functions
Partners will keep away once business is down and
losses increase
LIMITED LIABILITY COMPANY
Limited liability company is business owned by more than
20 partners, and can take part in the management of the
company.
The capital of limited liability company is divided in to
shares. Shares are either partly or fully paid. A fully paid
share holder’s personal assets cannot be sold to repay the
company’s indebtedness. A partly share holder can be
forced to pay the balance owing on the shares if the
company is indebted. Partners must buy one or more
shares; referred to as “LTD”
Merits
 Capital is not a problem, since its many partners
It involves professionals who take full responsibility of all
aspect of the company
It is privately owned
Demerits
 Shares can not be sold to public
Mistrust from members
CO-OPERATIVE SOCIETY
Co-operative societies started basically to avoid
exploitations by middlemen. This type is more important for
agro-produce, rural industries, small banks and textile
units. It has combined features of partnership companies
and joint stock companies. Members are share holders and
share profits. All shareholders are equal and there is no
concentration of wealth and power in few hands.
 There would be a periodic meeting of the society. The
office bearers are elected by members in the annual
meeting. Co-operative societies are managed on minimum
or no profit, to help members get commodities at lesser
than market rates.
Example:
Consumer co-operative society
Farmers’ co-operative society
Co-operative bank
Co-operative dairy
Etc
Merits
It is participative and democratic ownership
Common man benefited
Hoarding, black market is avoided
Individual domination is avoided as office bearers are
elected by voting
Demerits
 Some members in high position may dictates the office
bearers
Routine check and verification on quality and quantity is
difficult due to some occupation of office bearers
PUBLIC CO-OPERATION
An individual or a group of entrepreneurs can not start
public co-operation. In this case, either central government
or state government takes a lead. They also invariably take
assistance of financial institutions and nationalized banks
since the project is of very large nature and investment
requirements in huge.P.C organized rapid economic growth
and industrialization of the country, and creates necessary
infrastructures for economic development.
 It also helps to create employment opportunities.
It helps to explore natural resources for the benefit of the
nation to develop industries in those activities where private
entrepreneurs do not have interest.
Merits
 There is equal employment at public sector and no
discrimination as often seen in private sectors
Improve international relations by way of collaboration
Profit earned, could be used for other socio-economic
development
Demerits
 No job security for public sector
Too much union activities by workers has spoiled
discipline and dedication
ANY

QUALMS
THANK YOU