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Day 2 - Types and Forms of Business

The document discusses different types and forms of business organizations. It describes sole proprietorships, partnerships, and corporations. For each type and form, it provides details on their definition, advantages, and disadvantages.

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0% found this document useful (0 votes)
16 views21 pages

Day 2 - Types and Forms of Business

The document discusses different types and forms of business organizations. It describes sole proprietorships, partnerships, and corporations. For each type and form, it provides details on their definition, advantages, and disadvantages.

Uploaded by

enerywalker1
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chain Research Organisation And Consultancy

TRAINING IN BUSINESS MANAGEMENT AND ENTREPRENEURSHIP

Mr M. Musute (B.A, ZICA, MANGO, M&E)


PROJECT MANAGER at C.R.O.C
TYPES AND FORMS OF BUSINESS
ORGANISATIONS
 BUSINESS SETUPS ARE VITAL IN THE COMMUNITY IN THE SENSE THAT THEY
CONTRIBUTE TO THE ECONOMIC GROWTH OF THE COUNTRY THUS CREATTION
OF EMPLOYMENT, IMPROVING THE LIVELIHOOD OF PEOPLE, GENERATION OF
INCOME, MARKET EXPANSION, BULK PRODUCTION ETC.
 THEY ARE SO MANY BUSINESSES THAT HAVE BEEN REGISTERED AND THOSE THAT
HAVEN’T BEEN REGISTERED ACROSS THE GLOBE AND THEY ARE THE ONES THAT
ARE RESPONSIBLE IN PROVIDING GOODS AND SERVICES TO THE MARKET.
 BUSINESS IS A REGULAR PROCESS OF EARNING PROFIT BY SATISFYING
CONSUMER’S NEEDS THROUGH THE MANUFACTURING OF GOODS, RESELLING
OF PRODUCTS, PROVIDING SERVICES OR CARRYING OUT ALL THREE TOGETHER.
 FOR ANY BUSINESS ENTITY TO BE A SUCCESS INDIVIDUALS WHO ARE INVOLVED
NEED TO BE EQUIPPED WITH PARTICULAR SET OF SKILLS AND EXPERTISE TO
DERIVE MAXIMUM EARNING PROFIT OUT OF IT.
Cont…

 IF AN ENTERPRISE IS TO SURVIVE, GROW AND EXPAND, IT MUST YIELD PROFIT.


SO IT INCLUDES ALL THE COMMERCIAL AND INDUSTRIAL ACTIVITIES THAT
PROVIDE GOODS AND SERVICES TO THE PEOPLE WITH AN OBJECTIVE TO EARN
PROFIT.
 AN ENTERPRISE IN ECONOMIC TERMS RELATES TO ANY ORGANISATION
MOREESPECIALLY A COMMERCIAL ACTIVITY OR BUSINESS ACTIVITY WHOSE AIM IS
TO YIELD PROFIT.
 THESE COMMERCIAL ENTITIES ARE INTO DIFFERENT TYPES WHICH THUS BRINGS
US TO THE IDEA OF TYPES OF BUSINESSES.
 THUS, IT CAN BE BROADLY CLASSIFIED AS INTO THE FOLLOWING TYPES:
TYPES OF BUSINESS
CONT…

 THE DIAGRAM ABOVE SUMMARISES THE ALL CONCEPT OF BUSINESSES THAT ARE
BEEN MANAGED EITHER BY AN INDIVIDUAL OR GROUP OF PEOPLE.
 SERVICE BUSINESS: AN ACTIVITY PERFORMED TO EARN MONEY THROUGH
CUSTOMER SATISFACTION. IT INVOLVES PROFESSIONAL SKILLS AND EXPERTISE
E.G INSURANCE, MOBILE TELECOMMUNICATION SERVICES, AVIATION,
CONSULTANT, PROFESSIONAL TEACHERS ETC.
 MERCHADISING BUSINESS: PROCUREMENT OF GOODS FROM MANUFACTURERS
OR WHOLESALERS, AT A LOW PRICE AND SELLING IT AT A HIGHER PRICE TO
MAKE A PROFIT. IT IS ALSO KNOWN AS A RETAIL BUSINESS. E.G SUPERMARKETS,
WHOLESALERS ETC.
CONT…

 MANUFACTURING BUSINESS: MAKING PROFIT THROUGH PRODUCTION OR


CREATION OF GOODS FROM RAW MATERIAL IN SUCH A WAY THAT IT DERIVES
SOME UTILITY TO THE CONSUMER E.G PROCESSING SUGARCANE TO MAKE
SUGAR, ZAMBIAN BREWERIES, TRADE KINGS, MILLERS ETC.
 HYBRID BUSINESS: A BUSINESS WHICH INVOLVES ALL THE THREE ACTIVITIES, I.E.
MANUFACTURING OF GOODS, MERCHANDISING OF PRODUCTS AND DELIVERING
SERVICE FALLS UNDER THE HYBRID CATEGORY E.G. E.G. A FURNITURE SELLER,
WHO MANUFACTURES FURNITURE, BUYS OLD FURNITURE AND SELLS IT AT A
HIGHER PRICE AFTER REPAIRING AND ALSO PROVIDESSERVICES FOR POLISHING
OLD FURNITURE.
FORMS OF BUSINESS ORGANISATIONS

 ONE OF THE FIRST DECISIONS THAT YOU’LL HAVE TO MAKE AS A MANAGER IS


HOW YOUR BUSINESS SHOULD BE STRUCTURED OR HOW YOU SHOULD
RESTRUCTURE YOUR BUSINESS
 ANY BUSINESS FORM AS ITS OWN ADVANTAGES AND DISADVANTAGES HENCE IN
ESTABLISHING A FORM OF BUSINESS IT CALLS FOR MAKING THE RIGHT DECISION
FOR YOUR BUSINESS.
 ALL BUSINESSES MUST ADOPT SOME LEGAL CONFIGURATION THAT DEFINES THE
RIGHTS AND LIABILITIES OF PARTICIPANTS IN THE BUSINESS’S OWNERSHIP,
CONTROL, PERSONAL LIABILITY, LIFESPAN AND FINANCIAL STRUCTURE. THE
FORM OF BUSINESS DETERMINES WHICH INCOME TAX RETURN FORM TO FILE
AND THE COMPANY’S AND OWNER’S LEGAL LIABILITIES.
CONT…

 IN GENERAL WE CAN SIMPLY SAY THAT THERE ARE THREE FORMS OF BUSINESS
 1.SOLE PROPRIETORSHIP
 2.PARTINERSHIP
 3.CORPORATIONS
SOLE PROPRIETORSHIP
 THE SIMPLEST AND MOST POPULAR FORM OF OWNERSHIP REMAINS THE SOLE
PROPRIETORSHIP. THE SOLE PROPRIETORSHIP, AS ITS NAME IMPLIES, IS A
BUSINESS OWNED AND MANAGED BY ONE INDIVIDUAL.
 THE OWNER OF THE BUSINESS MAKES ALL THE BUSINESS DECISIONS. RECEIVES
THE PROFITS THAT THE BUSINESS EARNS, AND BEARS THE FINANCIAL
RESPONSIBILITY FOR LOSSES.
 THIS BUSINESS FORM BARS AN LEGAL RESTRICTIONS MEANING THAT AN
INDIVIDUAL CAN SIMPLY DECIDE TO GO INTO BUSINESS EXCEPT IN AREAS OF
ENTERPRISE WHERE BUSINESS LICENSE'S ARE REQUIRED.
CONT…

 THE OWNER DETERMINES HOW MANY EMPLOYEES TO HIRE, WHEN THEY


SHOULD BE REWARDED OR PENALISED, WHAT PRODUCTS TO PRODUCE, HOW
THEY ARE TO BE MARKETED. THE OWNER OF THE BUSINESS NEED NOT TO SEEK
AN ONES PERMISSION ONDECISION MAKING.
 THE BASIC LIMITATION UPON DECISION-MAKING IS THAT THE OWNER
MUSTOBSERVE THE LAW AND HONOURCONTRACTS. OTHERWISE, THE OWNER IS
FREE TO MAKE WISE OR FOOLISH DECISIONS.
ADVANTAGES OF SOLE PROPRIETORSHIP

 SIMPLE TO CREATE
 LEAST COSTLY FORM OF OWNERSHIP TO BEGIN
 TOTAL DECISION-MAKING AUTHORITY
 PROFIT INCENTIVE
 NO SPECIAL LEGAL RESTRICTIONS
 EASY TO DISCONTINUE
DISADVANTAGES OF SOLE PROPRIETORSHIP

 UNLIMITED PERSONAL LIABILITY


 LIMITED SKILLS AND CAPABILITIES
 LIMITED ACCESS TO CAPITAL
 LACK OF CONTINUITY OF THE BUSINESS
THE PARTENERSHIP
 PARTNERSHIP IS AN ASSOCIATION OF TWO OR MORE PEOPLE WHO CO-OWN A
BUSINESS FOR THE PURPOSE OF MAKING A PROFIT.
 THE CO-OWNERS (PARTNERS) SHARE THE BUSINESS’S ASSETS, LIABILITIES, AND
PROFITS ACCORDING TO THE TERMS OF A PREVIOUSLY ESTABLISHED
PARTNERSHIP AGREEMENT (IF ONE EXISTS).
 LIKE THE INDIVIDUAL PROPRIETORSHIP, PARTNERSHIPS ARE EASY TO ESTABLISH.
MOST PARTNERSHIPS ARE BASED UPON AN AGREEMENT THAT SPELLS OUT THE
OWNERSHIP OF SHARES AND DUTIES OF EACH PARTNER.
CONT…

 PARTNERSHIP CAN BE DIVIDED INTO TWO FORMS THUS:


 GENERAL PARTNERSHIP; PARTNERS WHO HAVE UNLIMITED LIABILITY FOR THE
PARTNERSHIP’S DEBTS AND USUALLY TAKE AN ACTIVE ROLE IN MANAGING THE
BUSINESS.
 LIMITED PARTNERSHIP; A PARTNERSHIP COMPOSED OF AT LEAST ONE GENERAL
PARTNER AND AT LEAST ONE LIMITED PARTNER.
ADVANTAGES OF PARTNERSHIP
 EASY TO ESTABLISH
 COMPLEMENTARY SKILLS
 DIVISION OF PROFITS
 LARGER POOL OF CAPITAL
 ABILITY TO ATTRACT LIMITED PARTNERS
 MINIMAL GOVERNMENT REGULATION
 FLEXIBILITY
DISADVANTAGES
 UNLIMITED LIABILITY OF AT LEAST ONE PARTNER
 DIFFICULTY IN DISPOSING OF PARTNERSHIP INTEREST
 POTENTIAL FOR PERSONALITY AND AUTHORITY CONFLICTS
CORPORATIONS

 THE CORPORATION IS THE MOST COMPLEX OF THE THREE MAJOR FORMS OF


BUSINESS OWNERSHIP.
 IT IS A SEPARATE ENTITY APART FROM ITS OWNERS AND MAY ENGAGE IN
BUSINESS, MAKE CONTRACTS, SUE AND BE SUED, OWN PROPERTY, AND PAY
TAXES.
 A CORPORATION IS A FORM OF BUSINESS ENTERPRISE THAT IS OWNED BY A
LARGE NUMBER OF SHAREHOLDERS. THE CORPORATION HAS THE LEGAL STATUS
OF A FICTIONAL INDIVIDUAL AND IS AUTHORIZED BY LAW TO ACT AS A SINGLE
PERSON.
 THE SHAREHOLDERS ELECT A BOARD OF DIRECTORS THAT APPOINTS THE
MANAGEMENT OF THE CORPORATION, USUALLY HEADED BY A PRESIDENT.
MANAGEMENT IS CHARGED WITH THE ACTUAL OPERATION OF THE
CORPORATION
CONT…

 UNLIKE THE SOLE PROPRIETORSHIP AND PARTNERSHIPS THAT CAN BE


ESTABLISHED WITH MINIMAL PAPERWORK, A CORPORATE CHARTER IS REQUIRED
TO SET UP A CORPORATION. THE LAWS OF EACH STATE ARE DIFFERENT, BUT
TYPICALLY, FOR A FEE, CORPORATIONS CAN BE ESTABLISHED (INCORPORATED)
AND CAN BECOME LEGAL “PERSONS” SUBJECT TO THE LAWS OF THAT STATE.
ADVANTAGES

 LIMITED LIABILITY
 UNLIMITED CAPITAL BASE
 SEPARATE LEGAL STATUS
 SEPARATION OF OWNERSHIP FROM MANAGEMENT
DISADVANTAGES

 HIGHER COSTS
 COMPLEXITY
 CONFLICTING OBJECTIVES
 HIGH GOVERNMENT REGULATION
THANK YOU!!

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