TYPES AND FORMS OF BUSINESS ORGANIZATION
A business organization is frequently referred to as a business entity. A business entity is any business organization that exists as an economic unit. Business entities can be grouped according to the type of business activity they perform.
1. Service companies perform services for a fee. This group includes companies such as accounting firms, law firms, repair shops, and many others.
2. Merchandising companies purchase goods that are ready for sale and sell them to customers. They include such companies as auto dealerships, clothing stores, and supermarkets.
3. Manufacturing companies buy materials, convert them into products, and then sell the products to the companies or to the final customer. Examples are steel miles, auto manufacturers, and so on.
The business entity concept applies to all forms of businesses – single proprietorship, a partnership, and a corporation.
A single (sole) proprietorship is business owned by an individual and often managed by that same individual. Single proprietors include physicians, lawyers, electricians, and other people who are ‘in business for themselves’. In a single proprietorship, the owner is responsible for all debts of the business. Operating as a proprietorship is the easiest way to get started in a business activity. Other than the possibility of needing a local license, there are not any prerequisites to beginning operations.
A partnership is a business owned by two or more persons associated as partners. Partnerships are created by an agreement. Included in the agreement are such terms as the initial investment of each partner, the duties of each partner, the means of dividing profits or losses between the partners each year, and the settlement to be made upon the death or withdrawal of a partner. Accountants, attorneys, and other professionals frequently operate their firms as partnerships.
A corporation is a business owned by a few persons or by thousands of persons. The owners of the corporation are called shareholders or stockholders. They buy shares of stock. If the corporation fails, the owners lose only the amount they paid for their stock. The personal assets of the owner are protected from the creditors of the corporation. The stockholders do not directly manage the corporation; they elect a board of directors to represent their interests. The board of directors select the president and vice president, who manage the corporation for the stockholders.
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T E X T 6
WHY ARE COMPANIES REFERRED TO AS LTD., INC., GMBH, OR S.A.?
An individual, like Henry Ford, might want to begin a small enterprise and personally retain total responsibility and liability, but once it starts to grow, a partnership or a "company"—such as Ford Motor Company—would need to be formed. The key factor in owning any company is the guarantee called limited liability: the owners of a company never have to pay more than they have invested in the company. Their liabilities are limited. When a company goes bankrupt, the owners can never be required to pay its unpaid bills.
The worst that can happen to investors in a limited liability company is losing their initial investment if the company fails. By limiting the downside risk for shareholders, companies are able to attract equity investors and raise large amounts of funds called equity capital through sales of shares rather than by borrowing money at potentially high interest rates.
The names of companies around the world reflect this guarantee of limited liability. The abbreviations "GmbH" in Germany, "Inc." in the United States, or "Ltd." in most other English-speaking countries indicate that the firm is a limited liability company and investors have nothing more to lose than the money invested in their shares. The "S.A." in French- and Spanish-speaking countries also refers to limited liability by defining shareholders as "anonymous." Since the identity of shareholders can be kept secret, the creditors of a bankrupt company have no right to pursue them for the company's unpaid debts.
Many countries make a clear distinction between public and private companies, with separate designations, such as AG and GmbH in Germany, or Plc and Ltd. in Britain. Generally, "public" companies are those large enough to have their shares traded on stock exchanges, while smaller unquoted companies are said to be "private," even though their shares can be held by the public at large. In some countries, a large company is said to be privately owned if its shares are not available to the general public. In the United States, where little distinction is made between public and private companies, most companies simply bear the title "Incorporated."
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1. What do the names of companies around the world reflect?
T E X T 7
JOB SPECIFICATION
An interesting feature of the labour markets is that many organizations do not specify the type of person they require instead they will give the details of a job in a job specification. The Department of Employment has given the following definitions of a job description and job specification:
Job description: a broad statement of the purpose, scope, duties and responsibilities of a particular job.
Job specification: a detailed statement of the physical and mental activities involved in the job. The specification is usually expressed in terms of behaviour: what the worker does, what knowledge he uses in doing it, the judgments he makes and the factors he takes into account when making them.
The great variety of job specifications which exists in business illustrates the range of specification in occupation. The five categories given below do not cover this wide range, but can become a guide to the role of manpower in organization.
1.Unskilled. Many jobs do not require any training or previous experience, for example manual labour or assembly work. These occupations are often highly repetitive and boring, as well as being poorly paid.
2.Mechanical or motor skills. There are some tasks in business which are performed by machines which require an operator. The more complicated the machine, then generally the more the operator must be.
3.Intelligence and knowledge. Occupations which require a high level of motor skill sometimes also demand a high level of intelligence and aptitude. But there are jobs which do not need mechanical skills but make demand on people’s knowledge.
4.Administrative or managerial skills. The ability to organize other people is a rare skill. It not only requires knowledge and understanding of the functions within an organization, but also the ability to motivate people. In addition managers must be able to organize nonhuman resources using techniques of forecasting, planning, coordinating and controlling. These are techniques which require judgment as well as knowledge.
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5.Decision-making skills and initiative. Decision-making is an everyday occurrence for everyone. We decide what to eat, what to wear, where to go, and so on. Similarly, decisions are part of an organization’s everyday activities. The higher one goes up the hierarchy, the more necessary is the skill of decision. The risks which all organizations face mean that that organizations have to be run by people who have the ability to diagnose and assess the risk, and the capacity to decide on the correct strategy. Business is constantly changing and organizations require people with enterprise and initiative in order to survive.
1. Give your own examples of a trade or profession illustrating each category of the job specification.
T E X T 8
ENTERPRENEURS
Entrepreneur is a person who organizes and managers a business. This is a French word that has been accepted into the English language. Its popularity probably has something to do with its grand sound which befits anyone who has the initiative to create and run a business.
Entrepreneurs are a mystery to some people, especially those who are only comfortable with a nine-to-five existence and assured weekly paychecks and fringe benefits. The entrepreneur is a business person who prefers to take calculated risks in order to be his or her own boss.
Sometimes the entrepreneur is regarded as a business person who takes risks. This is not so. An entrepreneur is a business person who minimizes risks. He or she does this by advance planning, research, and meticulous consideration of all factors that could affect and possibly endanger her or his enterprise. When the entrepreneur forgets to do advance investigation and preparation, then he or she is a gambler at best, and a failure statistic at worst.
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Speaking about entrepreneurship, Professor K. Vesper of the University of Washington says that “ Businesses continue to be launched by people who didn’t make it the first time around. A driving force in entrepreneurship… is addictiveness. Once people have a taste of freedom in a business of their own, they like it. They don’t want to go back to working for someone else.”
While the percentage of growth for men entering into business independence could be measured in the teens, women’s increase in a single decade was 69 percent. There is no mystery here. Women go into business for the same reason men do – to make money and to be their own bosses. The rise in female entrepreneurship is reminiscent of what the early-20th-century immigrants did – and the more recent waves of immigrants from different parts of the world. Entrepreneurship is regarded to be the first track to success. Rather than to take low-wage, big-industry job, people opt to use their wits and energy to climb the ladder of independence the entrepreneurial way.
The American magazine Venture attempted to dissect entrepreneurs and to see what makes them tick. They conducted a survey to which 2,740 readers responded. Here is what they had in common:
1) Typically they were firstborn children who had a positive relationship with their father. (2) They held jobs before they were 15 and started their first businesses by the time they reached 20. (3) They borrowed money to launch their enterprises and made themselves personally liable. (4) Most of them are college graduates, consider themselves demanding of others, and start work early in the day (82 percent start work before 9 a.m.). (5) Twenty percent described themselves as successful; another 53 percent claimed moderate success; 27 percent reported the expectation of success.
While these entrepreneurs are intrepid adventurers on the business sea, they still seek the approval of others—often after they have launched an action. Respondent Richard M. Ask, president of the 2000-member National Association of Entrepreneurs, wrote, "I go out and do what I damn well please, and then I look around for approval to reinforce the action."
How old are the people who start new businesses? The majority are 30 to 34, with the biggest segment (70 percent) between 25 and 44.
| Age of Entrepreneur % Under 20 years | 1 |
| 20 to 24 | 8 |
| 25-29 | 17 |
| 30-34 | 21 |
| 35-39 | 18 |
| 40-44 | 15 |
| 45-49 | 9 |
| 50-59 | 10 |
| 60 and over | 1 |
With what do entrepreneurs start up new businesses? How much money do they invest? Most businesses require between $20,000 and $50,000 in cash. The vast majority of business start-ups (87 percent) are in the range of a few thousand dollars to $100,000.
| Start-Up Capital | % |
| Under $5,000 | 17 |
| $5/000-$10,000 | 14 |
| $10,000-$20,000 | 16 |
| $20,000-$50,000 | 25 |
| $50,000-$100,000 | 15 |
| $100,000-$250,000 | 8 |
| $250,000-$500,000 | 2 |
| Over $500,000 | 1 |
Which businesses are the most popular? There is no doubt that retailing is number one. Nearly half of all new business start-ups are retail shops. Here is the line-up:
| Type of Business | % |
| Retailing Service Services | 46 19 |
| Construction | 8 |
| Manufacturing Finance | 8 5 |
| Professional | 5 |
| Wholesale | 4 |
| Transportation Agriculture Others | 2 2 1 |
1. Do you belong to the people who are comfortable with a nine-to-five existence? Are there many people of this type among your friends, relatives, colleagues?
2. “Calculated risk’—what is it?
3. Give your variant of an entrepreneur profile (age, traits of character, business, backgrounds, etc.)
T E X T 9
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