TYPES OF BUSINESS ORGANISATIONS
Sole proprietorships
Partnerships
Corporations
Co-operatives
Definitions of forms of business organizations
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Sole proprietorships |
Is the simplest form of business structure, where one person owns and operates the business, with no legal distinction between the owner and the business, meaning the owner is personally liable for all debts and liabilities. |
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Partnerships |
Is a formal arrangement by two or more parties to manage and operate a business and share its profits. |
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Corporations |
Is a legally established entity that can enter into contracts, own assets and incur debts, as well as sue and be sued-all separately from its owners. |
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Cooperatives |
A cooperative is a corporation organized and controlled by its members, who pool resources to provide themselves and their patrons with goods, services, or other benefits |
The are two different partnership
General Partnership:
All members share the management of the business and each is personally liable for all the debts and obligations of the business. This means that each partner is responsible for and must assume the consequences of the actions of the other partner(s).
Limited Partnership:
Some members are general partners who control and manage the business and may be entitled to a greater share of the profits, while other partners are limited and contribute only capital.
The are two different Corporations
Private Corporation:Business entity owned by individuals or a small group of shareholders, where the shares are not publicly traded on a stock exchange.
Public Corporation:An entity that operates independently from a government department but carries out its functions at arm’s length from central government.
ADVANTAGES AND DISADVANTAGES OF EACH FORM OF BUSINESS ORGANIZATION
Sole Proprietorship
Advantages
relatively low start-up costs; greatest freedom from regulation; owner in direct control of decision making; minimal working capital required; tax advantages to owner; all profits to owner.
Disadvantages
unlimited liability; lack of continuity in business organization in absence of owner; difficulty raising capital.
Partnership
Advantages
ease of formation; relatively low start-up costs; additional sources of investment capital; possible tax advantages; limited regulation; broader management base.
Disadvantages
unlimited liability; lack of continuity; divided authority; difficulty raising additional capital; hard to find suitable partners; possible development of conflict between partners.
Environment within which businesses operate
Business Environment
A business environment is a combination of internal and external factors and forces that significantly influence the operations of a business.
Internal environment
The internal environment of an organization refers to the conditions, factors, and components within the organization that affect how it functions and carries out its operations.
External Environment
The external environment refers to the factors, forces, and conditions outside an organization that can impact its operations and performance. This includes various elements such as:
Economic conditions Influences from the economy that can affect business performance.
Social and cultural trends Changes in societal values and cultural norms that can impact consumer behavior.
Political and legal regulations Laws and regulations that govern business operations.
Technological advancements Innovations that can create new opportunities or challenges for businesses.
Competitive forces The dynamics of competition that can affect market positioning. Overall, the external environment encompasses all factors outside the organization that influence its decisions, objectives, and overall performance.
Types of Business Environment
Economic Environment: Refers to economic factors that influence a business. Internal Business Environment: Includes factors within the organization’s control. Socio-cultural Environment: Encompasses demographic trends and societal values.
Technological Environment: Refers to scientific advancements.
Legal Environment: Governing bodies and laws.
Competitive Environment: Includes competitors, target markets, suppliers, and customers.
Natural Environment: Environmental factors.
Political Environment: Laws and regulations.
Global Environment: Factors impacting businesses globally.