Forms Of Business Organization JSS1 Business Studies Lesson Note

SOLE PROPRIETORSHIP

Sole trade is the oldest of the forms of business organization. It is a form of business that is owned, engaged, and controlled by one person to make a profit.

Another name for sole trade is sole proprietorship or one-man business.

A man/woman who engages in sole trade is known as a sole trader, shoe mender, law firm, kiosk owner, farmer, provision store, etc.

Features of Sole Trade

•                     It is established to make a profit
•                     It is easy to set up
•                     It gives room for quick decision-making

Sources of Capital

•                     Personal savings i.e. contribution
•                     Loan from friends and relatives
•                     Loan from bank and government

Advantages of Sole Trade

•         It is easy to run/establish
•         It requires small capital to start
•         There is freedom to run different types of business
•         The owner enjoys the profit alone
•         He/she controls the business alone
•         He makes a fast and quick decision

Disadvantages of Sole Trade

•         The owner bears the risk alone
•         He/she works for long hours
•         The death of the owner may end the business
•         Wrong decision-making can lead to problems for the business
•         The liability of the owner is unlimited

PARTNERSHIP BUSINESS

A partnership business is a business organization that exists between two to twenty persons coming together to form a business to make a profit.

It requires a minimum of two and a maximum of twenty but in banking services, two and ten as the maximum.

SOURCES OF CAPITAL

•                     Partners contribution
•                     By admission of new member/partner
•                     By plowing back profit to the business
•                     Loan from commercial banks

FEATURES OF PARTNERSHIP BUSINESS

•         It is not a legal entity business
•         The liability of partners is unlimited
•         It is owned by two to twenty people
•         Profit and loss are shared based on partners’ agreement.

TYPES OF PARTNERS

1. Active Partner: This is a partner that takes part in the running and management of the business.
2. General Partner: This is a managing partner and has unlimited liability.
3. Sleeping / Dormant Partner: This partner only contributes part of the capital and does not take part in the running of the business.

PARTNERSHIP DEED

This is a written agreement between the partners. It contains:

•                     The name of the company/firm
•                     The name of partner
•                     The amount of central required
•                     The nature of the business to be transacted
•                     How profit or loss will be shared.

Partnership Dissolution – means putting the life of an existing partnership business to an end i.e. dissolving the business.

ADVANTAGES

•         It has no more capital than sole proprietorship
•       The talent of individual partners can be developed
•         Business account is not published
•         Better decisions are taken
•         The partnership business can be developed into a bigger organization.

DISADVANTAGES

•         There is a delay in decision-making because the partners are many
•         Disagreement between partners may bring dissolution
•         The liability of partners is unlimited
•         The death of an active partner may put an end to the business

TOPIC: PUBLIC CORPORATION

A public corporation is a business organization set up, financed, and managed by the government not necessarily to make a profit but to provide essential services for the members of the public.

FEATURES OF PUBLIC CORPORATION

•                     It is owned by the government
•                     It is financed by the taxpayers’ money
•                     It is set up to render essential services to the public.
•                     It does not compete with any organization
•                     It is established by the act of parliament

ADVANTAGES OF PUBLIC CORPORATION

•         It has enough and sufficient capital
•         It ensures fair and equal distribution of the services provided
•         It serves as a means of controlling monopolies
•         It raises the standard of living of the people
•         It is owned by the government

DISADVANTAGES OF PUBLIC CORPORATION

•         It is very hard to set up
•         It requires a large amount of money
•         There is a delay in decision making
•         Overproduction and wastage are common among them
•         It lacks privacy
•     Interference from government affects the efficient management of the corporation

A public corporation is also known as an Enterprise or statutory corporation.

FULL MEANING OF SERVICES PERFORMED BY PUBLIC CORPORATION

1. NIPOST – Nigeria Postal Services
2. NPA – Nigeria Port Authority
3. NRC – Nigeria Railway Corporation
4. NWC – Nigeria Water Corporation (Water board)
5. NITEL – Nigeria Telecommunication Limited
6. NEPA – Nigeria Electric Power Authority (Now PHCN)
7. PHCN – Power Holding Company of Nigeria PLC

 CO – OPERATIVE SOCIETY

A cooperative society is a business organisation formed by people who have a common interest in owning and running a business for the benefit of their members.

TYPES OF CO-OPERATIVE SOCIETY

•                     Producer cooperative society
•                     Consumer co-operative society
•                     Multi-purpose co-operative society
•                     Credit cooperative society

PRODUCER CO-OPERATIVE SOCIETY: This is normally formed by a group of farmers who produce agricultural products of the same kind e.g. cocoa, rice, beans, etc.

The farmers want to take advantage of cheap seeds and grains supplied by government marketing boards.

CONSUMER CO-OPERATION SOCIETY: A society formed by a group of customers who contribute their money to buy goods in bulk for the benefit of their members.

MULTI-PURPOSE CO-OPERATION SOCIETY: This combines the activities of both the producers and consumers co-operative society types in carrying out its operation.

CREDIT AND THRIFT – This is a type of co-operative in which the members contribute money regularly to the purse of the society.

FEATURES OF CO-OPERATIVE SOCIETY

•         It is the union of persons and not capital
•         It provides services for the benefit of its members
•         It is easy to form
•         Every member is involved in running the business

SOURCES OF FINANCE

•         Voluntary contribution from the members
•         Fine and other special fees
•         Plough back profit to the business
•         Loan from government and banks

 ADVANTAGES

•         It encourages their members to form saving habit
•         They give loans to their members
•         They purchase goods on behalf of the members
•         It can be used to reduce exploitation

DISADVANTAGES

•         Insufficient capital for the business
•         Misunderstanding among members may affect the smooth running of the business
•         Unfaithfulness of the management may put the business to an end
•         Most of the management are not well experienced financially
•         Most members are illiterate.

 LIMITED LIABILITY COMPANY

This is a business organisation that has been in a corporation. It is an association of individuals who agreed to jointly put their resources together to have a business distinct from their owners.

It is a legal entity created through state approval and separates its owners. There are two types of limited liability companies:

•                     Public Limited Liability Company
•                     Private Limited Liability Company

PUBLIC LIMITED LIABILITY COMPANY

Public limited liability company that has a minimum of seven members and no maximum. It is owned by members of the public e.g. UAC PLC, FIRST BAND PLC, NESTLE PLC, ACADEMY PRESS PLC, etc.

They share profit called dividend yearly and the members are known as shareholders

FEATURES

•         It shares can be traded and transferred to the stock exchange market
•         It is required to publish its account at the end of the trading period
•         Workers can become shareholders
•         Its name ends with Plc – Public Liability Company

SOURCES OF FINANCE

•         Contribution from members
•         Loan and overdraft from a bank
•         Loan from a private individual
•         Create facilities from the supplier

ADVANTAGES

•         It can sell shares to the members of the public
•         It can also borrow from the members of the public
•         It engages in different lines of business
•         The share can be listed and quoted in the stock exchange market.

DISADVANTAGES

•         It is expensive to set up
•         It requires large capital
•         Slow decision making
•         The account must be published

PRIVATE LIMITED LIABILITY COMPANY

This is a company owned by Private Individuals. It can also be formed by a minimum number of two and a maximum of fifty members e.g. Oyelade Nigeria.

FEATURES

•         It is owned by Private individuals
•         It enjoys privacy
•         The shares cannot be traded on the stock exchange market
•         It must end with limited (LTD) e.g. Marvic and associate Nig. Ltd

SOURCES OF FINANCE

•         Contribution from members
•         Loan from private individuals
•         Credit facilities from suppliers
•         Loan from bank and overdraft

ADVANTAGES

•         It enjoys privacy
•         Its management structure is simple
•         The management and control are very easy
•     The annual report might not be published except for the use of the company.

DISADVANTAGES

•         Shares cannot be issued to the members of the public
•         Borrowing from the public is not allowed
•     A private limited liability company cannot be listed in the stock exchange markets.

 Assignment

•         What is a company?
•         Write short notes on:
•         Consumer cooperative society
•         Multi-purpose cooperative society
•         a. Who is a sole proprietorship?

1. Give five public cooperative