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BUSINESS ORAGNISATION | TYPES, PUBLIC ENTERPRISES, SOLE – PROPRIETORSHIP, PARTNERSHIP

economics

Business organization can be defined as an enterprise set up by an individual or group of individuals, government or its agencies for the main purpose of making profit and providing goods and services for the satisfaction of human wants.

TYPES OF BUSINESS ORGANISATIONS

  1. PRIVATE ENTERPRISES: Private enterprises are the enterprises owned and managed by private individuals. The major forms of private organizations are listed; (1) sole proprietorship (2) partnership (3) private and public limited liability companies and co-operative societies (4) co-operative societies. Examples include Nestle Nigeria Plc., Cadbury Nigeria Plc.

PUBLIC ENTERPRISES

PULIC ENTERPRISES are government or state –owned business organization which are usually set up by Act of legislation, with main aim of maximizing public welfare. Example in Nigeria include the federal Radio corporation of Nigeria (F R C N), the Nigeria Ports Authority (N P A) etc.

CHARACTERISTICS OR FEATURES OF PUBLIC ENTERPRISES

  1. They are owned by the government and usually set up by Act of Legislation or Act of Parliament.
  2. The government provides the capital for setting up the business
  3. Objectives is to provide social services
  4. The business is controlled by a board of directors appointed by the government.
  5. A public enterprise is a legal entity or a corporate body.

SOLE – PROPRIETORSHIP

SOLE – PROPRIETORSHIP may be defines as a business organization established, owned, financed and controlled by one person with the aim of making profit. The sole – proprietorship, also popularly referred to as one – man business is the oldest and the most common type of business organization.

CHARACTERISTICS OF SOLE PROPRIETORSHIP

  1. OWNERSHIP: The business enterprise is owned by one person.
  2. UNLIMITED LIABILITY: The owner of the business is personally liable for the debt incurred by the firm. If the business fails, his personal properties can be sold to settle the debt.
  3. NOT A LEGAL ENTITY: Under the law, the owner and the business are the same. It cannot sue or be sued on its own.
  4. OWNER PROVIDES ALL THE CAPITAL: The capital to finance the business is solely provided by the owner.
  5. NO SHARING OF PROFIT: In a one-man business, the profit or loss goes to the owner alone.
  6. BEARS RISK ALONE: The owner bears the risk of production alone.
  7. He takes decisions alone.

 

SOURCE OF CAPITAL OF A SOLE PROPRIETORSHIP

  1. Personal saving
  2. Loan from friends
  3. Loan and overdraft from banks
  4. Grants/loan from Government
  5. Trade credit

ADVANTAGES OF SOLE PROPRIETORSHIP

  1. It involves small capital
  2. It is easy to establish
  3. Decision taking is quick
  4. It is easy to manage
  5. All profits belong to the owner
  6. It can fit any environment
  7. There is privacy in conducting business affairs
  8. The one-man business is easy to set up and organize
  9. The sole-proprietorship is suitable where there is need for special products and small market for goods and service.
  10. It maintains close personal contact with customers.

DISADVANTAGE OF SOLE PROPRIETORSHIP

  1. There is limited capital to finance the business
  2. The sole proprietor has unlimited liability
  3. The business is not a separate legal entity.
  4. The business has uncertainty of continuity
  5. The sole proprietor lacks the advantages of specialization
  6. The sole proprietor bears all risks alone.

 

THE PARTNERSHIP

A partnership may be defined as a type of business organization in which two to twenty persons agree legally to set up and manage a business outfit with the sole aim of making profit.

FEATURES OR CHARACTERTICS OF PARTNERSHIP

  1. The number of partners in Nigeria ranges from two to twenty for most business, but two to ten for a banking business
  2. The active partners usually take the major decisions together.
  3. The partners contribute capital or skill or both according to the agreement reached. In return each of them receives a proportion of the profits as agreed.
  4. The partners bear the risks of the enterprise jointly. With the exception of the limited partner, the partners have unlimited liability.
  5. The business is not a separate legal entity and cannot therefore sue or be sued in its own name.
  6. The control and management of the business is in the hands of the active partners.
  7. The motive of setting up a business is to maximize profit.

TYPES OF PARNERSHIP

  1. LIMITED PARTNERSHIP: Limited partnership is a type of partnership which is formed and registered under the limited partnership Act. In a limited partnership, there must be one general partner with unlimited liability or responsible for the debts of the firm. The others are limited partner whose liability is limited to the amount invested. The partners cannot take equal part in management and administration of the business.
  2. General or ordinary partnership: In general partnership, partners have equal responsibility and power and each may participate in the management of the business. They are equally responsible for the liability of the partnership, which is unlimited. All of them take part in the day- to – day running the business and are liable or responsible for the debts of the firm.

 

TYPES OF PARTNER

  1. ACTIVE PARTNER: This is the partner who takes active part is the formation, financing and management of the business.
  2. SLEEPING OR DORMANT PARTNER: This partner only contributes part of the capital used in the formation and running of the business but does not take part in management and organization of the business.
  3. NOMINAL OR PASSIVE PARTNER: This partner exists only in name or word because; he contributes nothing but his names in the formation of the business. He is a person whose high standing or reputation in the society can increase the goodwill of the firm in order to ensure certain benefits to the organization.

ADVANTAGES OF PARTNERSHIP

  1. Capital is more easy obtained
  2. The business has greater continuity than the sole proprietorship.
  3. There is privacy in conducting business affairs
  4. Join decision making
  5. Greater possibility of expansion.

DISADVANTAGES OF PARTNERSHIP

  1. The partnership has limited capital: The maximum number of partners in the partnership is twenty.
  2. There is unlimited liability for the active partners: If the business fails the private assets of active partner may have to be sold to meet the business debts.
  3. The business may not have perpetual existence: The death or withdrawal of active partner may lead to the end of the partnership.
  4. The business is not a separate legal entity: A partnership cannot sue or be sued in its owner right.
  5. Slow in decision and policy making: All members have to be consulted before any major decision is taken
  6. Disagreement may end the business.

SOURCES OF CAPITAL FOR PARTNERSHIP

  1. Personal contributions from partners
  2. Loans and overdraft
  3. Trade credit
  4. Undistributed profit
  5. Admission of new partners.

QUESTIONS:

  1. What are the differences between a one – man business and partnership?
  2. Explain the advantages and disadvantages of sole proprietorship.

 

See also

DEFINITION OF FIRM, PLANT AND INDUSTRY FIRM

SCALE OF PRODUCTION | SMALL, MEDIUM & LARGE

DIVISION OF LABOUR: ADVANTAGES, DISADVANTAGES, LIMITATIONS & SPECIALISATION

CAPITAL: TYPES OF CAPITAL, IMPORTANCE OF CAPITAL & ENTREPRENEUR

LOCALISATION OF INDUSTRIES

 

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